Setback for online sales tax effort

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Lawmakers and industry groups who support online sales tax legislation are hopeful that they can get it passed despite a setback in Congress.

Advocates for the sales tax measure had wanted to link it to a ban on taxing Internet access.

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But lawmakers did not take that step, instead crafting a conference report for a customs bill that would extend the ban on Internet access taxes indefinitely — but do nothing on the sales tax issue.

Supporters of online sales tax legislation want the Senate to strip the access tax language from the conference report, but the effort appears to face an uphill climb. 

Conference reports generally cannot be changed on the floor. 

A senator could raise a point of order that the Internet access taxes ban is not germane, which, if successful, would send the report back to the House without the moratorium. A point of order can be waived with 60 votes. 

An aide to Sen. Dick DurbinDick DurbinClinton ally stands between Sanders and chairmanship dream Reid backs House Puerto Rico bill McConnell pledges redo vote on Zika after break MORE (D-Ill.) said last month that the senator has the votes to defeat such an effort, however.

If the customs bill passes the Senate with the Internet access tax ban included, industry groups said the push for the sales tax legislation would go on.

“It’s still a top priority for the industry,” said Jason Brewer, a spokesman for the Retail Industry Leaders Association. “We want to see action. We want to see movement.” 

Several major industry groups have pushed for years to pass the Marketplace Fairness Act or similar legislation, which would give states the power to compel business that aren’t physically located in their borders to collect their sales taxes. 

Brick-and-mortar retailers have made an especially strong push, arguing their online rivals now have an unfair advantage. It is also a priority of state and local governments that want additional tax revenue.

Jennifer Platt, vice president of federal operations for the International Council of Shopping Centers, said her group is “hopeful we can deal with the state tax issues in block in 2016.”

Virginia Gov. Terry McAuliffe (D), vice chairman of the National Governors Association (NGA), said Thursday that if Congress doesn’t pass online sales tax legislation, states would try to find alternative solutions.

“Let me be very clear, we are asking Congress to act,” McAuliffe said during NGA’s annual State of the States speech. “If Congress does not act, we in our states will act on our own.”

Under a 1992 Supreme Court ruling, states can only compel retailers to collect sales taxes if the businesses have a physical presence in their states. Technically, taxpayers are still required to pay “use” taxes on their remote purchases, but those rules aren’t always followed.

Max Behlke, manager of state-federal relations at the National Conference of State Legislatures, said that state lawmakers are “sick and tired” of Congress’s inaction on sales taxes. States may enact their own laws to try to get the Supreme Court to overturn its earlier ruling or to force Congress to act, he added.

A bipartisan group of Congress members have been working on a legislative fix to the Supreme Court ruling in recent years. 

The Senate passed a version of the Marketplace Fairness Act in 2013, but the bill stalled in the House because House Judiciary Committee Chairman Bob GoodlatteBob GoodlatteLobbying world Overnight Tech: Judiciary leaders question internet transition plan | Clinton to talk tech policy | Snowden's robot | Trump's big digital push Overnight Finance: Anxiety grows over Brexit vote | Investors prefer Trump to Clinton in poll | Key chairman open to censuring IRS chief MORE (R-Va.) had concerns. A new version of the legislation was put forward in the Senate last year by a group that includes Durbin and Sens. Mike EnziMike EnziJudd Gregg: The silver lining Judd Gregg: A little change Lobbying World MORE (R-Wyo.) and Lamar AlexanderLamar AlexanderSenate honors Tennessee coach Pat Summitt Bipartisan gun measure survives test vote Overnight Healthcare: GOP plan marks new phase in ObamaCare fight MORE (R-Tenn.).

“Senator Enzi is continuing to work with supporters of the Marketplace Fairness Act in the House and Senate to look for opportunities to move the legislation forward,” an Enzi official said.

On the House side, Rep. Jason ChaffetzJason ChaffetzOvernight Energy: Obama signs chemical safety reform into law House caucus to focus on business in Latin America Freedom Caucus urges vote on impeaching IRS commissioner MORE (R-Utah) introduced an online sales tax bill in June called the Remote Transactions Parity Act that is similar to the Senate bill but is designed to address some of the concerns with it.

The legislation remains a priority for Chaffetz, and he is working on educating colleagues about the legislation in an effort to get it passed on the House floor, a spokesman for the congressman said 

Goodlatte has suggested an approach to the online sales tax issue that is different from Chaffetz and the senators. He circulated a discussion draft that would tax purchases at the rate of the retailer’s state, rather than the customer’s state, but groups have been critical of it because they believe it may amount to a sales tax increase.

The Obama administration supported the Marketplace Fairness Act when the Senate passed it in 2013 but has not been vocal about the issue.

Republican presidential candidates have a mix of views on the topic.

The three remaining GOP senators in the race — Rand PaulRand PaulTrump: Rivals who don't back me shouldn't be allowed to run for office Trump hires Rand Paul's former digital director: report Trump flexes new digital muscle MORE (Ky.), Marco RubioMarco RubioPoll: Rubio holds massive lead in primary Rubio: Turkey attack 'directed' by ISIS Trump: Rivals who don't back me shouldn't be allowed to run for office MORE (Fla.) and Ted CruzTed CruzMike Lee: Trump 'accused my best friend’s father of conspiring to kill JFK' Trump: Rivals who don't back me shouldn't be allowed to run for office Kasich touts poll showing he does better against Clinton than Trump MORE (Texas) — all voted against the Marketplace Fairness Act in 2013.

But New Jersey Gov. Chris Christie, another presidential hopeful, has supported requiring out-of-state online retailers to collect sales taxes from residents of his state, and he thinks that states should each be able to decide whether they want to compel retailers to collect the taxes. 

Meanwhile, Ohio Gov. John Kasich (R), who like Christie is pinning his 2016 hopes on New Hampshire, has supported using the additional sales tax revenue that would result from passage of congressional legislation to lower income taxes in his state.