WASHINGTON — Gov. Robert Bentley said Saturday that Congress should pass legislation to make online retailers start collecting sales taxes but without an exemption for small businesses.

Bentley, like many of the state leaders gathered in Washington for the National Governors Association meeting, said the Marketplace Fairness Act will level the playing field between brick-and-mortar retailers, who already collect and remit sales taxes, and their online-only competition.

But for Bentley, the issue is about more than fairness. He estimates Alabama’s cash-strapped General Fund budget would gain $140 million to $150 million a year if online retailers were required to hand over the sales taxes when their customers buy something and have it delivered to their house or business in Alabama. Under current law, the burden to pay the sales tax is on the customer, but it rarely happens and is not enforced.

“That tax is already owed. Even if it’s a small business, you have to pay it, by law,” Bentley said. “This is not a new tax.”

The Senate passed the online tax bill last year, but it exempted businesses with less than $1 million in annual revenue out of concerns that it would be a costly administrative burden for small companies.

But House Republicans, including Rep. Spencer Bachus, R-Vestavia Hills, are working on a version that may not include such an exemption. House Judiciary Committee chairman Rep. Bob Goodlatte, R-Va., and Bachus said recently that a key principle should be that complying with the online sales tax collection law should be so simple and cheap that small businesses wouldn’t need an exemption.

Bachus is chair of the subcommittee that deals with Internet tax issues.

Bentley said the Marketplace Fairness Act would protect jobs in Alabama.

“Local businesses in Alabama are put at a 10 percent disadvantage when they compete with online sales,” Bentley said. Alabama’s state sales tax is 4 cents, but many cities and counties levy their own sales taxes of 4, 5 or 6 cents.

n Alabama, 75 percent of the online sales tax goes to the state’s General Fund, which pays for prisons, Medicaid, public safety and other non-education agencies. Without the $140 million or $150 million that would be generated under the proposed federal law, Bentley said problems such as overcrowded prisons would worsen.

“Everything that is dependent on the General Fund will be hurt, and we’ll have to find some other revenue source,” Bentley said. “I wish I could tell you exactly where we’re going to find the revenue sources.”

Americans for Tax Reform, a conservative group that opposes tax increases, said the Marketplace Fairness Act would hurt online businesses based in Alabama.

“If Alabama wants to bolster revenue, it needs to keep the tax system fair, competitive and simple to encourage innovation and growth, not encroach on state sovereignty and put online retailers out of business,” according to a Feb. 18 statement from Americans for Tax Reform.

A new law in Alabama would give online retailers the ability to submit one single payment to the state, according to the Alabama Retail Federation, which supports the legislation.

Bentley flew to Washington on the state plane Friday, with staff, to attend the National Governors Association meeting.

On Saturday, he attended a Republican Governors Association breakfast and chaired a NGA panel discussion on transportation issues. Today, Alabama’s commissioner of the Department of Children’s Affairs will discuss the state’s pre-K program at a governors’ panel about early childhood education, and Bentley will talk to the NGA health committee about combating prescription drug abuse.

Bentley and his wife will join the governors at a black-tie event at the White House tonight, and the governors will meet with President Barack Obama on Monday morning.

February 23, 2014