House panel to explore Internet sales tax

House Judiciary Committee Bob Goodlatte plans to hold a hearing in the first half of the year to explore online sales tax legislation, advocates say.

Proponents of an Internet sales tax bill, such as major retailers, are holding out hope for action in the House in 2014 despite the opposition of many conservatives and the skeptical stance of Speaker John Boehner (R-Ohio).

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Supporters and opponents of online sales tax proposals are focusing their lobbying energy on Goodlatte (R-Va.), who has released a set of seven principles that an online sales tax bill would have to meet in order to be considered by his committee

"House Judiciary has a busy schedule," but Goodlatte has plans to hold a hearing on Internet sales taxes in the first half of the year, according to Steve DelBianco, executive director of NetChoice, which represents Facebook, Yahoo and online sales tax critic eBay.

Goodlatte "wants to hear legislative concepts that would fit his principles," DelBianco said.

A Judiciary aide declined to comment on whether the committee has plans for a hearing. The committee is "not actively drafting legislation at this time" but continues "to welcome ideas consistent with those principles from interested parties," the aide said.

Few people involved in the push expect the chairman to move quickly on a bill, especially now that he is being tasked with leading a legislative push on immigration reform.

Still, lobbyists are optimistic that the chairman can craft a bill with broad support.

The fight over an online sales tax bill shifted to the House last summer after the Senate passed the Marketplace Fairness Act, which would allow states to collect sales tax on purchases that citizens make from out-of-state online retailers.

Currently, state sales tax is technically due for all purchases, but states only have the authority to collect sales tax on purchases that citizens make from retailers with a physical presence in each state.

Supporters say the bill would even the playing field between online retailers and brick-and-mortar stores. Opponents argue it would create mass confusion as online retailers are forced to navigate tax rates and rules for nearly 10,000 state and local tax jurisdictions.

Goodlatte has said that he wants to consider the issue carefully.

His “principals” specified that an online sales tax bill should not create a new or discriminatory tax, should not create greater burdens for online retailers than brick-and-mortar stores and should give online retailers "direct recourse" to challenge taxes an compliance burdens.

Additionally, an online sales tax bill should be simple enough for small businesses to easily follow, should encourage states to compete on tax structures, should respect state sovereignty and should protect customer privacy, he said.

Goodlatte has "made clear the kind of bill he’s looking to do" and is "rethinking how to assemble these pieces," said David French, senior vice president for government relations at the National Retail Federation, which backed the Marketplace Fairness Act.

DelBianco said he’s confident that Goodlatte will come through with a bill that limits compliance burdens for online retailers, but believes the chairman will have to jettison much of the Marketplace Fairness Act in the process.

"It’s not a trivial matter to amend [the Marketplace Fairness Act] to have it fit with those principles," he said, pointing to the bill’s provision that would require online retailers to answer to the nearly 10,000 state and local tax jurisdictions.

DelBianco suggested that provision could be replaced with voluntary agreements where each state would audit online retailers within its borders and remit the appropriate sales tax to the customers’ home states.

That’s a concept that Goodlatte has indicated he "thinks is worth exploring," DelBianco said.

French is optimistic that the differing opinions on compliance burdens can be solved.

In a letter to Goodlatte last week, a coalition of retail companies and groups — including French’s — said it is ready to help translate Goodlatte’s "seven guiding principles into legislation that will provide meaningful simplifications for remote sellers and create a level playing field for all retailers."