WASHINGTON — Retailers hailed a long-awaited move by the chairman of a key House committee who released a draft Internet sales tax bill on Thursday.
Rep. Bob Goodlatte (R.,Va.), chairman of the House Judiciary Committee, issued the draft legislation, which would allow states to take certain steps to require online sellers to collect sales tax.
“We hope this move will bring the attention needed to get Congress to move forward in treating purchases made online the same as those made in local stores when it comes to sales tax collection,” said David French, senior vice president for government relations at the National Retail Federation. “We look forward to working constructively with chairman Goodlatte and Congress to ensure legislation is passed to achieve the level playing field for sales tax collection that is so desperately needed. Retailers should be allowed to compete based on how well they serve their customers, not according to tax policy determined by an out-of-date, quarter-century-old court decision.”
Joe Rinzel, senior vice president for government affairs at the Retail Industry Leaders Association, said, “Retailers are pleased that the process is advancing and we look forward to an open debate in the House aimed at ensuring that all retailers can compete on a level playing field. Retailers have worked earnestly with chairman Goodlatte for several years to resolve this issue. While retailers welcome today’s action by the chairman to move the process forward, we will continue to press for changes that achieve true parity at the point of sale.”
Retail groups have been pressing Congress to pass legislation for several years. But Congress has been unable to find a resolution on the issue of taxing Internet sales. States have been enacting their own laws to close what they say is a loophole created in 1992 in Quill v. North Dakota, a Supreme Court ruling that stated retailers were required to collect sales tax from out-of-state customers only if they have a “physical presence” in the customer’s state.
E-tailers such as eBay and others that don’t have distribution centers or offices in a certain state have relied on that decision to avoid collecting sales tax on online orders. Bricks-and-mortar retailers argue that puts them at a competitive price disadvantage.
Several online sales tax bills have been introduced in Congress over the past 15 years but lawmakers in both chambers have not been able to find compromise on legislation to get a final bill across the finish line. The Senate passed a bill in May 2013 that later stalled in the House.
A group of bipartisan senators led by Dick Durbin (D., Ill.) and Mike Enzi (R., Wyo.) introduced a new bill in March 2015 dubbed the Marketplace Fairness Act that would allow states to collect taxes online and other remote sales in the 45 states and the District of Columbia that collect sales tax whether they have a physical presence in the state or not. It also provides for a small-seller exemption that prohibits states from requiring remote sellers with less than $1 million in annual nationwide remote sales to collect sales and use taxes.
French said Goodlatte’s draft bill uses a calculation for the sales tax rate and base on a product purchased remotely that would be overly complicated and would allow for some loopholes, particularly in states that don’t collect sales tax, as well as in states that don’t collect sales tax on particular consumer goods, such as clothing.
As a result, the bill “falls short of true sales tax parity,” French said, noting that NRF will continue to work with Goodlatte on the issue.
French also noted that House Speaker Paul Ryan (R., Wis.) has indicated he would like to see a resolution on the issue in the House before the end of the year. There is potential that both the House and Senate could vote on sales tax legislation in a post-election lame duck session, French said.