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Senators renew Internet sales tax push

Senators renew Internet sales tax push
© Greg Nash

Senators seeking to give states broader latitude to charge sales taxes on Internet purchases are preparing a last-ditch effort to pass legislation through Congress before the midterm elections.

A bipartisan group of lawmakers has been pushing such a fix for years, insisting it would level the playing field between brick-and-mortar and online retailers.

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Now, Senate supporters believe they have a perfect vehicle: the Internet Tax Freedom Act, a relatively uncontroversial measure, which sailed through the House on Tuesday, that would extend a long-standing ban on state and local taxes on Internet access. 

“Why wouldn’t we?” Sen. Mike EnziMichael (Mike) Bradley EnziThe 14 GOP senators who voted against Trump’s immigration framework Mulvaney remarks on Trump budget plan spark confusion Overnight Finance: Breaking down Trump's budget | White House finally releases infrastructure plan | Why it faces a tough road ahead | GOP, Dems feud over tax-cut aftermath | Markets rebound MORE (R-Wyo.), a longtime supporter of online sales tax legislation, said when asked if he planned to attach the Marketplace Fairness Act to the bill. “They’re a perfect fit.”

Enzi and several other senators released their new bill on Tuesday, which would attach the online sales tax measure to a 10-year extension of the Internet freedom bill. The House passed a permanent version of the online access bill on Tuesday.

The move sets up a potential showdown between the House, where GOP leadership and a key committee chairman have shown little interest in online sales tax legislation, and the Senate, which passed its bill more than a year ago with bipartisan support.

The Internet Tax Freedom Act expires Nov. 1, meaning providers could send out warnings about potential new taxes on online access just weeks before the election, an outcome that neither supporters nor opponents of the online sales tax legislation particularly want.

Still, Enzi said he and other backers of the online sales tax legislation, including Majority whip Dick DurbinRichard (Dick) Joseph DurbinAmerica’s waning commitment to the promise of the First Amendment Senate rejects Trump immigration plan What to watch for in the Senate immigration votes MORE (D-Ill.), would press ahead, despite anticipated resistance from Senate Finance Committee Chairman Ron WydenRonald (Ron) Lee WydenOvernight Health Care: Trump eases rules on insurance outside ObamaCare | HHS office on religious rights gets 300 complaints in a month | GOP chair eyes opioid bill vote by Memorial Day Trump eases rules on insurance sold outside of ObamaCare Grassley, Dems step up battle over judicial nominees MORE (D-Ore.) and other opponents of the measure.

“That’s not taxing the Internet itself, which we’re against,” Enzi said. “That’s allowing states to collect the taxes that are due.”

The Senate’s Marketplace Fairness Act, passed in May 2013, would allow states to collect sales taxes from out-of-state retailers. Currently, states cannot enforce the collection of sales tax from retailers that do not have a physical presence in their borders. 

While sponsors said the sales tax bill would create parity between physical and online retailers, some members slammed the bill, saying it would subject small retailers to a complex maze of compliance burdens from thousands of state and local tax jurisdictions. 

Critics have also condemned the speed with which the bill moved through the Senate, and opponents on Tuesday said they saw no reason to link the sales tax and Internet access measures.

“They’re separate issues,” Wyden said, insisting that the online sales tax bill places burdens on Internet retailers that aren’t felt by brick-and-mortar stores. “The Marketplace Fairness bill as written now is contradictory to what the Internet Tax Freedom bill is all about.”

The online sales tax bill has faced more roadblocks in the House, where House Judiciary Committee Chairman Bob GoodlatteRobert (Bob) William GoodlatteProgressive group targets GOP moderates on immigration Florida shooting reopens CDC gun research debate Congress punts fight over Dreamers to March MORE (R-Va.) has called for a simpler bill than what passed the Senate.

In September, Goodlatte released a set of seven principles that any online sales tax bill must meet to be considered in the Judiciary Committee, including equal burdens for physical and online retailers and language that encourages local governments to compete on tax policy. He also held a hearing on the issue in March.

Despite the principles, hearing and pledges to work on alternative approaches to the online sales tax bill, Goodlatte has not yet brought a bill up for consideration in the Judiciary Committee. Rep. Jason ChaffetzJason ChaffetzTrump, GOP at new crossroads on deficit Chaffetz: Spending vote means GOP 'lost every single bit of credibility' on debt Let’s not fail in our second chance to protect Bears Ears MORE (R-Utah), a Judiciary Committee member, has pursued online sales tax legislation but has yet to release a measure.

Industry groups say the Senate is looking to move the online sales tax bill in the face of Goodlatte’s inaction.

“The Senate is getting ready to try to force the issue,” said David French, senior vice president for government relations at the National Retail Federation, which has aggressively lobbied Congress to pass an online sales tax bill.

The Senate sponsors of the Marketplace Fairness Act are “interested in moving the bill on any vehicle they can,” and the Internet Tax Freedom Act is a “very likely vehicle,” French said.

Still, Senate Majority Leader Harry ReidHarry Mason ReidWATCH: There is no Trump-Russia collusion and the media should stop pushing this The demise of debate in Congress ‘North by Northwest,’ the Carter Page remake MORE (D-Nev.) and Durbin would have to move the combined measure over the objections of Wyden, who is the original co-author of the Internet access bill and whose committee has jurisdiction over online sales tax issues. 

Steve DelBianco — executive director of NetChoice, which represents online companies including eBay and has lobbied against the Marketplace Fairness Act — said he hopes that Wyden will be a helpful ally in blocking the measure.

Wyden “is seen as a very popular and charismatic leader, especially on tech issues,” he said.

Reid has given Wyden more leeway, at least publicly, than the previous Senate Finance Committee Chairman, Max BaucusMax Sieben Baucus2020 Dems pose a big dilemma for Schumer Steady American leadership is key to success with China and Korea Orrin Hatch, ‘a tough old bird,’ got a lot done in the Senate MORE (D-Mont.). But Democratic leaders also appear to be accepting a House plan to prop up the Highway Trust Fund, even though Wyden has a similar proposal.

DelBianco said he was confident that the House would stand strong even if the Senate succeeds in attaching the online sales tax bill.

“I think they would find a way to send it right back to the Senate,” DelBianco said. 

Still, he added, “You always have to be concerned about sending something over to the Senate and having it come back as a disaster.”

But Rep. Steve WomackStephen (Steve) Allen WomackCiting deficits, House GOP to take aim at entitlements Dems tee off on Trump budget House presses Senate GOP on filibuster reform MORE (Ark.), the primary GOP backer of the online sales tax legislation in the House, said the Judiciary Committee had plenty of time to craft an alternative measure.

“If it gets attached to something and comes back to us and it’s a must-pass piece [of legislation], then we have nobody to blame but ourselves,” Womack told The Hill. “The sands in the hourglass are slipping away.”

--This report was updated at 8:07 a.m.