US HOUSE OF REPRESENTATIVES PASS WIRELESS REFORM BILL; PUTS 5 YEAR FREEZE ON MOBILE TAXES

The United States House of Representatives approved the Wireless Tax Fairness Act on Tuesday, an initiative that prevents new local and state taxes on wireless bills for the next five years. “We need to encourage the development and adoption of wireless broadband, not tax it out of existence,” Representative Zoe Lofgren said. The average tax rate on goods and services in the United States is 7.4% but consumers with wireless contracts pay an average of 16.4% in taxes and fees, WirelessWeek said. “The exorbitant discriminatory taxes on wireless customers are not only unfair, they are counterintuitive, adding another costly impediment to the success of so many American businesses who are struggling in the midst of a prolonged recession,” Representative Trent Franks argued.

Representative Judy Chu from California was the sole Representative who held out on voting in support of the act. “This will deny states the flexibility to respond to economic downturns during the moratorium and therefore undermine the ability of states to pay for essential services,” Chu said.

“On behalf of the 300 million wireless customers in the U.S., CTIA applauds the Wireless Tax Fairness Act’s lead sponsors, Representatives Lofgren and Franks, who worked tirelessly to get the bill approved in the House,” the CTIA said in a statement. “Today’s vote is a crucial step toward providing wireless subscribers with some much needed relief by putting a five-year freeze on new, discriminatory taxes and fees on their monthly bills. In light of the challenging economy, we hope the U.S. Senate moves swiftly to pass the companion bill.”

AMAZON ENDS AFFILIATE PROGRAM IN ILLINOIS

On Thursday, Illinois Governor Pat Quinn signed into law the Mainstreet Fairness Bill which would require any online retailer with affiliates in the state to collect state sales tax on purchases from Illinois residents. As a result of the bill being signed into law, Amazon notified affiliates in the state that it would end its affiliate program on April 15th. Overstock.com has also threatened to take a similar move and end its affiliates program in Illinois as well.

The state is taking advantage of a 1992 Supreme Court decision which said that retailers don’t have to collect state sales tax on out-of-state shipments unless it has offices within the state. Clearly, Illinois believes that an affiliate of a retailer is equivalent to having such an office.

Many states have been frustrated with the loss of sales tax revenue associated with items purchased online since most online retailers don’t collect it. States typically have a section on income tax forms which asks citizens to voluntarily admit to any online purchases in order to pay the associated sales tax, but few people actually report such purchases. The Illinois Department of Revenue estimates the state loses between $153 million and $170 million a year as a result.

Illinois is in the midst of correcting what some say is the state’s worst financial crisis resulting in $6 billion in unpaid bills and $4 billion in payments the state has missed to fund state pensions. In January, the state began addressing the crisis by passing legislation to increase the state income tax by 67%, the largest such increase in the state’s history. In addition to receiving bi-partisan support from both houses of the Illinois General Assembly, the Mainstreet Fairness Bill also received the support of the Illinois Retail Merchants Association whose business members believe it is unfair that out-of-state businesses have an advantage simply because they are not required to collect a sales tax.

Amazon did leave the door open so that should the current law be changed or modified it would consider resuming the program.

Walmart on the other hand has taking advantage of the crisis faced by Amazon and Overstock.com affiliates by inviting affiliates of those companies to join the Walmart affiliate program instead. Since Walmart maintains retail locations within Illinois it already collects sales tax on purchases sold through its website.