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Online Sales Tax or Internet Poker in 2012?

Proponents of an online sales tax and of the legalization and regulation of internet poker received some intriguing news last week.

First, the possible federal online sales tax.

Amazon has recently reached agreements with several states to collect and remit sales tax on purchases in those states. One problem with this piecemeal approach, however, is that online retailers are stuck with the burdensome task of complying with each state’s different regime. Plus, not all states have entered into such agreements.

Last Thursday, Senate Majority Leader Harry Reid made remarks regarding possible online sales tax legislation, predicting it could pass this year, according to The Hill.

This WSJ piece provides additional background about the online sales tax issues and points of contention among lawmakers and lobbyists.

Second, internet poker.

Since the Department of Justice shifted its stance on the Wire Act last December, states have taken steps to legalize and regulate intrastate online gambling. Similar to the online sales tax issue, a state-by-state approach presents a variety of compliance obstacles for companies seeking to run internet poker websites licensed in the U.S.

The Las Vegas Review-Journal is reporting Senator Dean Heller (R-NV) is working to persuade fellow GOP lawmakers in Congress to support internet poker legislation. Senator Reid and Senator Kyl have reportedly agreed on a bill framework, although the bill hasn’t surfaced yet.

Reid has said he wants the internet poker sites run by Nevada gaming companies. This position has drawn the ire of Native American tribes and state lotteries, among other parties, who also want a piece of the action. In fact, this Thursday the U.S. Senate Committee on Indian Affairs will hold a hearing on the regulation of tribal gaming, to disuss both brick and mortar and internet gaming issues.

As for whether 2012 is the year legislation is passed in Congress, both issues face similar hurdles. Either bill would likely need to be attached to a legislative vehicle, and there aren’t many remaining. GOP support may be lacking as well. Of course, there’s always the lame duck session, but as The Hill notes, bigger ticket issues such as Bush-era tax rates and automatic spending cuts will likely dominate that agenda.

In the meantime, states will continue to address these issues as they please.

  1. Matthew Rappaport
    July 23rd, 2012 at 14:22 | #1

    I’m surprised there hasn’t been a faster mobilization on Internet sales and gambling issues considering the potential tax revenue at stake. State governments could make a ton of money taxing online gambling as a vice, similar to how New York rakes it in on cigarettes.

    For instance, states could apportion taxes in a way where both the state hosting the servers (e.g. Nevada) takes a slice and the state hosting the taxpayer himself/herself takes a slice (e.g. New York).

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