By Bernie Becker - 07/18/12 09:00 AM EDT
Retail groups say their campaign for an online sales tax bill is gaining momentum and now say it’s a question of when, not if, such a measure is enacted.
The National Retail Federation (NRF) and the Retail Industry Leaders Association (RILA) say last week’s push for a sales-tax bill in the Senate, though unsuccessful, shows that the idea is gaining traction. The groups say the growing pressure from governors across the country is having an impact and express confidence that a bill will eventually pass Congress.
“Nobody’s expecting a lot because not a lot’s moving through the process,” said Jason Brewer, a RILA spokesman. “There’s very few [legislative] vehicles out there.”
But anti-tax groups that oppose the measure say one vehicle is all retailers would need to make their plan a reality, and are worried about the legislative deal-making likely to come at the end of the year.
Andrew Moylan, vice president of government affairs at the National Taxpayers Union, said congressional support for an online sales tax measure is not as widespread as retailers suggest. But with retailers lobbying hard on the issue, he said, the legislation could nonetheless slip through during the lame-duck bedlam.
“This could mean that the fate of the bill will not be decided on a fair up-or-down vote, which it would likely lose, but by backdoor legislative maneuvering to get it included in a bigger, must-pass bill,” Moylan said.
The debate over online sales taxes has grown out of a 1992 Supreme Court decision, which held that companies were only obligated to collect sales taxes from customers in states where they are physically located.
Two decades later, that ruling has led to a divide between retailers and some conservative groups that are typically aligned on other tax and policy issues.
The debate in Congress has also not broken down along party lines, with lawmakers from states with high sales tax rates being more open to a federal solution. And in the business world, Amazon, which is expanding into more and more states, has backed congressional action, while other tech companies like eBay have opposed it.
Proposals in both chambers of Congress would allow states to collect sales tax revenue from retailers outside their borders. Supporters of that approach say it would allow states to bring in revenue that was already owed while eliminating an unfair advantage that Internet sellers have over brick-and-mortar stores.
“I don’t think it’s a partisan issue,” David French, senior vice president for government relations at NRF, told The Hill. “Principled conservatives who don’t want to see the size of government grow — we agree with them.”
French also said that, with online sales accounting for an ever-increasing piece of the retail pie, lawmakers would be forced to act on the issue at some point.
The argument that the measure would simply let states decide how to collect sales tax revenue has been well-received by prominent GOP governors like Chris Christie (N.J.) and Mitch Daniels (Ind.)
A new report from the non-partisan State Budget Crisis Task Force found that state sales tax bases were eroding, in part because of the “difficulty of collecting taxes on Internet-related transactions.”
“It’s basically an 11-page bill about a two-word issue: states’ rights,” said Sen. Lamar Alexander (R-Tenn.), a prominent GOP supporter, adding that he thought the measure would pass either this year or next.
Alexander and two other key sponsors of the Marketplace Fairness Act — Senate Majority Whip Dick Durbin (D-Ill.) and Sen. Mike Enzi (R-Wyo.) — pushed to attach the measure to a small-business tax proposal the Senate was considering last week.
The proposed amendment never received a vote as the small-business measure became mired in the broader debate over the extension of the Bush-era tax rates.
But supporters argue the publicity from the senators’ efforts, as well as attention from national newspapers, has put the wind at their backs.
In the House, meanwhile, backers of the Marketplace Equity Act from Reps. Steve Womack (R-Ark.) and Jackie Speier (D-Calif.) are trying to round up more allies. The Judiciary Committee is scheduled to hold a hearing on the sales tax bill next week.
Still, some influential conservatives, from Sen. Jim DeMint (R-S.C.) to groups like the Heritage Foundation, are dead set against the online sales tax measure, arguing it smothers Internet commerce. They say policymakers should instead concentrate on lowering the tax burden on Americans.
Rank-and-file Republicans have also expressed concern about backing a measure that would cause many constituents to pay more out of their pockets for purchases.
Even Democrats from states without sales taxes, such as Sen. Ron Wyden (Ore.), have made the case that the online sales tax proposals would force fledgling startups in their states to play tax collector for jurisdictions across the country.
Wyden and Sen. Kelly Ayotte (R-N.H.) — who also hails from a state with no sales tax — introduced a resolution last year calling on Congress not to allow states to impose new tax collecting requirements on small Internet retailers.
“I’m going to fight for my state,” Wyden told The Hill. “But I think as a country, when you’re talking about job creation, this is something that could really do damage to what is one of our most exciting engines.”
And at a time when outside groups are beginning to get end-of-the-year worries, lawmakers are, at least publicly, more confident they’ll come out on top this year.
“America doesn’t want the government to mess with the Internet, and I think when the people get wind of what’s going on here, it’s going to cause a lot of concern,” DeMint told The Hill on Tuesday.
“I will be real surprised if we pass anything this year,” added DeMint, a Tea Party favorite who issued a Tuesday statement blasting the Senate online sales tax measure.
But Enzi said he thought supporters might not even have to wait for the lame-duck session to get a vote. And with the increasing support from states, the Wyoming Republican expressed confidence an online sales tax measure would get enacted this year.
“You’ve got to realize I’m an eternal optimist,” Enzi said. “I’ve been working on this for about 14 years.”