Lawmakers are moving closer to resolving the online sales tax debate, but there’s still no solution yet.
At a U.S. House Judiciary Committee hearing Tuesday on the Marketplace Equity Act, a larger group of Republic and Democratic lawmakers seemed to move past the idea of whether online sales should be taxed to how to do so without the process becoming burdensome.
That change in opinion seems to be based on the issue of fairness.
Retail Industry Leaders Association executive vice president for public affairs Katherine Luger said following the hearing, “Today’s hearing made three things abundantly clear: The current system is broken and the loophole enjoyed by online retailers is unfair to local retailers; fixing the system and closing this loophole is not a new tax; and the time is right for Congress to finally act.”
The trade association has been pushing for a level playing field between brick-and-mortar retailers and their online competitors, and have said that e-tailers have an artificial competitive advantage.
A loophole was created back in 1992 in a Supreme Court ruling in Quill v. North Dakota that said retailers didn’t have to collect sales taxes in states where they don’t have a physical presence. Although the decision pertained to a catalogue sale, it has been relied on by e-tailers as the reason for not collecting a state sales tax on online orders from out-of-state customers.
Since then, consumers themselves are supposed to report on their online purchases and determine how much they should pay in local taxes.
Earlier in the day the National Retail Federation, the world’s largest retail trade association, honed in on its point that the current sales tax system unfairly burdened local retailers and shortchanged communities.
NRF senior vice president David French said, “A federal solution to the Quill decision will allow states to broaden the base and apply their taxes equally to all items sold promoting an efficient sales tax system.”
French’s comment was part of written testimony that was submitted by NRF to the House Judiciary Committee for Tuesday’s hearing.
In the hearing, one of the concerns raised was how to collect the taxes and whether existing software was capable of making the process easier.
Tennessee’s Republican Governor Bill Haslam, who testified on behalf of the National Governors Association, backs federal legislation to allow states to mandate collecting the sales tax for online purchases. He said that Tennessee loses $400 million a year because it can’t collect sales tax from websites that operate out of state.
The House bill by Reps. Steve Womack, R-Ark., and Jackie Speier, D-Calif., has bipartisan support in Congress and among many state GOP governors such as Haslam.