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Foes of Internet sales tax rally forces

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Online retailers are storming Capitol Hill this week to lobby against legislation that would broaden the authority of states to collect online sales taxes.

EBay is bringing in 45 small-business owners from 35 different states to push back on proposals that the company says would hurt small online sellers and stifle Internet commerce. 

The small-business owners will be telling representatives about the ways small businesses of all kinds rely on the Internet, according to eBay’s senior director of global public policy, Brian Bieron.

“Everybody uses the Internet as part of their business,” he said. “The Internet and mobile technology are powering all kinds of small businesses,” such as the ones “at home in your states and in your districts.”

The Senate last year passed the Marketplace Fairness Act, which would allow states to collect taxes on residents’ purchases from out-of-state retailers. Currently, each state can only collect a sales tax from online retailers located within its borders.

Supporters of the bill, including retail stores and Internet giant Amazon, say it would create an even playing field between brick-and-mortar stores, who remit taxes on every sale, and online sellers, who remit taxes only to tax jurisdictions in which they’re located.

Opponents such as eBay say the measure would create a complex maze of nearly 10,000 state and local tax jurisdictions, unfairly burdening online retailers.

Though the Senate passed a sales tax bill nearly a year ago, supporters have failed to gain traction for legislation in the House, with Speaker John Boehner (R-Ohio) saying he’s not a fan of the Senate measure.

In the House Judiciary Committee, Chairman Bob Goodlatte (R-Va.) released a set of seven principles last year that would have to be met by any online sales tax bill in front of his committee.

In his principles, Goodlatte called for a bill that treats online sellers and brick-and-mortar sellers the same, is simple enough to not need an exemption for small businesses, encourages state and local governments to compete on tax rates and does not create a new tax.

After releasing the principles, Goodlatte held one hearing earlier this year that examined alternative proposals to addressing the online sales tax issue without adopting the Senate bill wholesale.

Rep. Jason Chaffetz (R-Utah), a member of the House Judiciary Committee, is working to shape an online sales tax bill such that fits Goodlatte’s principles.

A spokeswoman for Chaffetz said the congressman is optimistic he can meet Goodlatte’s standards. She declined to provide information about a timeline for producing legislation, saying that Chaffetz is “trying to focus on getting a good bill right now.” 

Chaffetz is working with Rep. Steve Womack (R-Ark.), who introduced the House companion to the Senate’s bill last year.

“This problem isn’t going away and, without a legislative solution, more and more Main Street businesses will continue to close their doors,” Womack said in a statement Monday.

“I have years of insight from working towards a fix that levels the playing field without infringing on states’ rights, and I will continue to share it and work with Congressman Chaffetz.”

EBay’s Bieron said that it is possible but likely difficult to reshape the Senate bill to fit with Goodlatte’s online sales tax principles. 

“I would never say that it can’t be done, but we continue to work with Chairman Goodlatte and other stakeholders to find the right path forward,” he said.

But supporters of the Marketplace Fairness Act say the support of Chaffetz, an ambitious third-term lawmaker with his eye on the House Oversight gavel next year, can only give their efforts momentum.

“It’s a totally different game when you have Jason Chaffetz saying he’ll take the lead,” one supporter said. “He’s someone that leadership trusts, and is trusted by conservative factions.”

The supporter added that backers of a federal online sales tax solution were hoping to tack their bill on to an extension of the Internet Tax Freedom Act, a law that expires on Nov. 1 and seeks to limit taxes on online access.

Backers of the Senate measure say attaching an online sales tax bill to that bill could be their best shot in getting something enacted this year, given that they fully expect an extension of the Internet tax moratorium to reach President Obama’s desk.

With Congress already in election year mode, supporters of a wide range of policy initiatives are already pointing to the lame-duck session after November’s election as the best shot for their proposals.

But the backer of the Marketplace Fairness Act said that was a dangerous strategy, arguing that the legislative session after the election might not be very fruitful if Republicans wrest away control of the Senate.

“I don’t think anybody would be wise to put all their eggs in the lame-duck basket,” the supporter said.

Retailers are hoping the House moves on the issue in time for next year’s holiday shopping season.

“In order to get this into law effectively for the 2014 holiday season, this bill would have had to have been passed by the end of last year,” said David French, senior vice president for Government Relations at the National Retail Federation.

Until there’s a federal law, states “have acted on their own, and it creates a lot of confusion,” French said, adding that “the go slow approach is hurting local retailers.”

 “I’m not sure why it has taken Chairman Goodlatte as long as it has.”