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Lawmakers Battle Over Virginia's Online Sales Tax Bill

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If the online sales tax legislation passes, Virginia could bring in an additional $250 million to fund transportation projects.
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If the online sales tax legislation passes, Virginia could bring in an additional $250 million to fund transportation projects.

When Virginia's General Assembly passed a transportation bill in February, they also sent a signal to Congress: allow states to recoup sales taxes from online purchases. Tucked inside the highway-funding bill is language directing money from future online sales to go to transportation.

Virginia Republican Scott Rigell, who is a sponsor of the bill, says it's an integral part of the overall transportation plan for the state.

Last week, the Senate overwhelmingly approved a measure to make it easier for states to collect sales taxes from online purchases. Since then, lobbyists for big online retailers and small business owners have stormed House office buildings trying to sway their local representatives.

Virginia Republican Rob Wittman says neither side of this debate is shy. "There are a lot of voices on both sides, and I'm trying to listen to it and understand what people's concerns are," he says.

The reason for the intense lobbying effort is that billions of dollars are at stake. Virginia officials expect to reap more than $250 million from online sales tax revenue. That is, if the bill passes the House.

That's far from guaranteed. House Speaker John Boehner and other party leaders oppose it, while conservative groups are labeling the bill a new tax.

"That annoys me to suggest it's a new tax," says Virginia Democrat Jim Moran, who believes the attack is unfair. "It's not a new tax. It's an improved method of enforcement to bring about equality in taxation."

Rigell agrees that it isn't a new tax, and shouldn't be considered as such. "It's just the collection of an existing tax," he says. "There are arguments that it is cumbersome and unduly. I just disagree with that. The software makes it very easy to collect the tax, and it's the right thing to do."

The speaker says he opposes bringing the Senate bill up for a vote in the House, which means the legislation could die on the vine in the Judiciary Committee.

But the money for Virginia's transportation projects has to come from somewhere. So if the online sales tax bill fails, gas prices are expected to go up.

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