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Norquist’s Group Takes Low-Key Role in Internet Sales Tax Debate Norquist’s Group Takes Low-Key Role in Internet Sales Tax Debate

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TAXES

Norquist’s Group Takes Low-Key Role in Internet Sales Tax Debate

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Grover Norquist(Richard A. Bloom)

The group led by antitax crusader Grover Norquist has racked up many successes in its efforts to torpedo legislation that would lead to higher taxes, but it has taken on a more low-key role in the debate over whether to allow states to collect revenue from Internet sales. Americans for Tax Reform has also had more limited success in keeping Republicans in line on the online sales-tax issue.

The group, known for the “antitax pledge” it urges lawmakers to sign, opposes the legislation that would allow states to require online and catalog retailers to collect sales taxes from out-of-state customers.

 

The bill has bipartisan support and Republicans who back it contend it would not constitute a new tax because it merely allows states to collect existing taxes that are owed, but rarely paid, by consumers. Republican supporters also say that it does not violate the antitax pledge that rejects “any and all” efforts to increase marginal income-tax rates on individuals or businesses.

“The fact is it is not a new tax. It is not a violation of the pledge at all,” Rep. Steve Womack, R-Ark., who has signed the pledge, told National Journal in an interview last week. “As a matter of fact, I think it’s good conservative legislation."

Womack has sponsored legislation in the House with Rep. Jackie Speier, D-Calif., that would allow states that meet certain tax-simplification requirements to require online and catalog retailers to collect sales taxes from customers even in states where those businesses have no store or other facility. Similar legislation has been introduced in the Senate by Michael Enzi, R-Wyo., Dick Durbin, D-Ill., and Lamar Alexander, R-Tenn.

 

For two decades, states and some retailers have prodded Congress to close a loophole created by the Supreme Court’s 1992 Quill Corp. v. North Dakota decision. The ruling limited states’ ability to require sales-tax collections in the case of retailers that have no brick-and-mortar store or other facility in the state. But the court left the door open for congressional action.

States say the limitation on Internet sales-tax collections has cost them billions. Brick-and-mortar retailers and companies that sell their goods both online and in stores say they face a competitive disadvantage because of the tax issue.

Retail groups including the National Retail Federation and the Retail Industry Leaders Association, which represents big-box stores such as Lowe's and Walmart, have banded together over the issue. The retail coalition is making a major push to try to get Congress to act this year and its efforts have gained traction. Hearings have been held in both the House and Senate, most recently last week in the Senate Commerce Committee. And Enzi and Durbin have said they will push to attach their legislation to any bill that may have a shot at clearing the Senate but will need to gather enough GOP support to overcome a likely filibuster in the Senate.

Opponents of the Internet sales-tax measures have not been able to match the lobbying power of the supporters. NetChoice and eBay are among the most vocal critics of the legislation.

 

Americans for Tax Reform did come out against the Enzi-Durbin bill when it was introduced last fall but it has not been as visible on the issue as other critics. At the same time, it has not said whether any of the measures introduced in Congress on Internet sales collections would violate its anttax pledge.

“We have also not made pledge determinations since there are three different bills,” Kelly Cobb, Americans for Tax Reform’s government affairs manager, told National Journal. “New variations on the legislation could still be introduced, and the leading bill will likely be amended should the issue move forward.”

Yet, as momentum has built in favor of the legislation, the group may be stepping up its efforts. While it did not testify at last week’s Senate Commerce hearing, ATR submitted written testimony and published a blog post. “Barring very significant revisions, the more the Internet tax gains traction in Congress, the more taxpayer and other free-market groups are poised to weigh in against it,” Cobb said.

ATR also differs with Womack and other Republicans who say the legislation would not amount to a tax increase. “As currently written, each of these federal bills would raise taxes at the state level while dissolving the physical nexus standard for tax collection, a fundamental taxpayer protection built into our tax code,” Cobb said.

Both Alexander and Womack say they have discussed the issue with Norquist. “We’ve agreed to disagree” on the issue, Womack said. Lawmakers and other supporters have sought to frame the Internet sales tax as a states’-rights matter and that approach is resonating with some on Capitol Hill. More than two dozen Republicans have signed on as cosponsors of Womack’s bill, while four of the Enzi-Durbin bill’s cosponsors are Republicans.

“It’s a states’-rights issue and ATR is generally a conservative outfit, and if they want to argue against raising taxes then the place to make that argument is in the states,” Alexander said in an interview. “I think most states will use the extra dollars that come in to lower tax rates, which ought to make ATR happy.”

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