House chairman: Internet sales tax bill has ‘a long way to go’

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Under current law, states can only collect sales taxes from retailers that have a physical presence in their state. People who order items online from another state are supposed to declare the purchases on their tax forms, but few do. 

The Marketplace Fairness Act would empower states to tax out-of-state online retailers but would exempt small businesses that earn less than $1 million annually. Supporters argue the bill would close an unfair loophole that benefits online retailers over their brick-and-mortar competitors.

But Goodlatte said the Senate's version of the legislation is too complicated.

“While it attempts to make tax collection simpler, it still has a long way to go," the Judiciary Committee chairman said. "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."

He also expressed concern that the bill "could open the door for states to tax or even regulate beyond their borders."

"I am open to considering legislation concerning this topic but these issues, along with others, would certainly have to be addressed," Goodlatte said. "The committee will also look at alternatives that could enable states to collect sales tax revenues without opening the door to aggressive state action against out-of-state companies.”

The sponsors of the Marketplace Fairness Act in the House are Reps. Steve Womack (R-Ark.), Jackie Speier (D-Calif.), Peter Welch (D-Vt.) and John Conyers (D-Mich.).

“I am proud to have joined sixty-nine of my Senate colleagues from both sides of the aisle in passing this long-overdue legislation that will give much needed support to local businesses around the country,” Sen. Dick Durbin (D-Ill.), a lead co-sponsor, said in a statement after the Senate approved the legislation. 

"A solid majority of the Senate stood up for small business today. I think the support in the House will be similar if the leadership practices what they preach and calls this bill for a vote.”

The other lead supporters of the Senate bill were Sens. Mike Enzi (R-Wyo.), Lamar Alexander (R-Tenn.) and Heidi Heitkamp (D-N.D.)