Online sales tax bill could crash in House

Supporters of a bill that would broaden states’ ability to collect sales tax on online purchases acknowledge they face a tough battle in the House.

The measure, called the Marketplace Fairness Act, appears on a glide path toward passage in the Senate, with a final vote likely in early May.

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But while Democratic leaders in the Senate supported the bill enough to bypass the Finance Committee and bring it straight to the floor, the GOP brass in the House has so far shown little interest in the measure.

The issue has received such scant attention in the lower chamber that neither Speaker John Boehner (R-Ohio) nor Majority Leader Eric Cantor (R-Va.) has taken public positions on it.

A Boehner spokesman deferred to House Judiciary Chairman Bob Goodlatte (R-Va.), whose panel has jurisdiction over the online sales tax bill, and a spokesman for Cantor, Doug Heye, said only: "We'll review what the Senate sends over."

The House is also unlikely to follow the Senate’s lead in sidestepping the committee process on the online sales tax bill – and Goodlatte, with Boehner’s blessing, has taken the lead in raising concerns about the legislation.

“We do have a ways to go,” Rep. Peter Welch (D-Vt.), a sponsor of the bill, told The Hill on Friday. “But we’re also much further along than we were a couple of years ago, or even a couple of months ago.”

The Marketplace Fairness Act, for which retail groups and state government organizations have lobbied extensively, would allow states to collect sales tax revenue from Internet retailers throughout the country.

A 1992 Supreme Court decision currently bars states from collecting from businesses that don’t have a physical location within their borders.

Groups like the National Governors Association have said that states could badly use the roughly $23 billion in lost revenue they’re currently missing out on, and the National Retail Federation and the Retail Industry Leaders Association say the proposal would simply roll back the unfair advantage that online shopping outlets have on brick-and-mortar stores.

The bill, supporters stress, would have no affect on federal revenues, and would simply allow for the collection of sales taxes that consumers already owe but rarely pay.

But so far, the measure has also caused divisions in a range of groups that often stick together on tax issues – from the online retailers themselves and conservative groups to Democrats and Republicans in the Senate.

Lawmakers from states without a sales tax – including senior Finance members like Chairman Max Baucus (D-Mont.) – railed against the measure on the Senate floor this week, asserting that the bill would burden retailers that aren’t currently forced to charge sales tax to customers.

The marketplace fairness bill, sponsored by Senate Majority Whip Dick Durbin (D-Ill.) and Mike Enzi (R-Wyo.), cleared its most recent procedural hurdle in the Senate on Thursday with 63 votes, about a dozen fewer than it had received earlier in the week.

Grover Norquist’s Americans for Tax Reform and Heritage Action are among the conservative outfits to oppose the bill, saying it would amount to a tax increase on consumers and expand the tentacles of state governments.

Amazon, which is meeting the physical presence test in an increasing number of states, and the online auction site eBay are also on opposite sides of the issue. eBay is trying to rally sellers on the site to fight to exempt retailers with less than $10 million in out-of-state sales from the bill, up from the current $1 million.

Goodlatte said in a statement to The Hill that he understands the current concerns of brick-and-mortar shops, and that online sales tax is an “extremely complex” issue. The Virginia Republican has met with prominent GOP supporters of the measure, including Enzi, Sen. Lamar Alexander (R-Tenn.) and the lead Republican sponsor of the House bill, Rep. Steve Womack (Ark.).

But, Goodlatte added, the current version of the Marketplace Fairness Act is not “sufficiently simplified” and “still has a long way to go.”
 
“There is still not uniformity on definitions and tax rates, so businesses would still be forced to wade through potentially hundreds of tax rates and a host of different tax codes and definitions,” Goodlatte said, adding that he was also concerned about increasing the reach of state governments.

“I am open to considering legislation concerning this topic but these issues, along with others, would certainly have to be addressed."

House Ways and Means Chairman Dave Camp (R-Mich.) also has concerns about the current proposal, including that it could impede startups and that the $1 million exemption is too low.

The Ways and Means panel does not have jurisdiction over the online sales tax bill, but other top tax-writers – including Baucus, Camp’s counterpart in the Senate – have said they think the issue should be discussed as part of their current tax reform efforts.

But supporters of the bill also believe that the expected success in the Senate will give their efforts in the House a boost. Jason Brewer, RILA’s vice president for communications and advocacy, also noted that the House version of the Marketplace Fairness Act already has about two dozen GOP sponsors.

“Suggestions that the House Republicans are united in opposition to this are wishful thinking on the part of our opponents,” Brewer said.

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