Tax lawyers and House members wrestled with how to best tax purchases made over the Internet on Wednesday, mulling such options as levying taxes based on the retailer’s location instead of the purchaser’s address.
Judiciary Committee Chairman Bob Goodlatte started by declaring that the Marketplace Fairness Act the Senate passed last year — which authorizes states to compel online businesses to pay sales taxes — is a nonstarter in the lower chamber. He went on to say he wants to start “winnowing down” alternative proposals to put online retailers on an even foothold with brick-and-mortar stores.
Currently, tax laws require businesses to have a physical presence in a state to collect sales taxes on purchases made there. Goodlatte acknowledged local businesses could be hurt as consumers take their shopping online to avoid paying sales tax.
“Many argue that unfair sales-tax laws are contributing to [the decline of traditional retailers],” the Virginia Republican said. “The committee is sympathetic to the plight of traditional retailers. It is serious about searching for a solution that the various parties can accept.”
Goodlatte did not lay out a timeline for legislation, but Democrats urged quick action.
“This issue is a prime opportunity for all of us to work in a bipartisan basis on legislation,” ranking member John Conyers said. “But it is imperative that we do so this year.”
The Michigan Democrat said he would have preferred to mark up the Senate bill, but was pleased the issue was being addressed.
Opponents to the Senate bill have argued it would burden online retailers with meeting tax requirements for the country’s nearly 10,000 taxing jurisdictions, and the tax lawyers who spoke Wednesday said their options would solve that concern.
One alternative — origin sourcing — would levy state sales taxes based on the retailer’s location rather than the purchaser’s address.
“Simply treating remote sales in the same way that we already treat brick-and-mortar sales would level the playing field in an honest way,” said the R Street Institute’s Andrew Moylan.
Detractors said such a proposal could set off a “race to the bottom,” causing retailers to rush en masse to establish locations in the five states that don’t currently collect sales tax. Others argued for keeping consumers’ tax contributions local.
“If I buy something in Washington, I don’t want to pay Washington,” said Republican Rep. Spencer Bachus of Alabama. “I want to pay where my kids go to school.”
Another proposal floated by the Simon Property Group’s William Moschella would simply ban transactions that don’t meet the sales-tax laws of the state to which the product is shipped.
Others touted the Streamlined Sales Tax Project, a 24-state effort to make sales taxes simpler and more uniform in order to pave the way for a nationwide online sales tax.
Consumers are technically obligated to pay a use tax on sales-tax-free online purchases, essentially giving their state government an equivalent amount. But fewer than 2 percent of online shoppers pay the tax, and some estimates peg the lost revenue to state governments at $23 billion. Many governors have expressed a desire to collect that extra cash flow, and some have pledged a reduction in other taxes if online sales tax revenues start rolling in.
Meanwhile, traditional retailers have backed the Senate bill, as has Amazon — which has an increasing footprint as it expands its warehouses into more states. EBay has led much of the opposition to legislation.
The chief issue raised by opponents is the difficulty for online retailers — especially smaller ones — in correctly assessing sales tax for buyers all over the country. Compliance issues could lead to out-of-state audits and cause expensive litigation for retailers, some members said.
Advocates said those concerns are overblown, responding that simple software could make compliance easy. But that didn’t satisfy some Republicans, who said the Affordable Care Act’s rocky rollout has made them leery of government-touted software fixes. “We can’t compute our way out of a paper bag,” said Republican Rep. Blake Farenthold of Texas.
What We're Following See More »
Twenty-one states, the District of Columbia and several public interest groups filed the first major lawsuits Tuesday to block the repeal of the Federal Communications Commission’s net neutrality rules. The FCC's rules had prohibited Internet providers from slowing down or blocking websites. New York Attorney General Eric Schneiderman, who is leading the states' suit, said that the FCC’s repeal was “arbitrary” and “capricious” and violates federal law. The suit comes just a day after Democrats in the Senate said they were inching closer to acquiring the votes needed to pass legislation overturning the FCC's rule change. It has garnered the support of all 49 Democratic senators as well as one Republican, Sen. Susan Collins (R-ME).
"A former C.I.A. officer suspected of helping China identify the agency’s informants in that country has been arrested, the Justice Department said on Tuesday. Many of the informants were killed in a systematic dismantling of the C.I.A.’s spy network in China starting in 2010 that was one of the American government’s worst intelligence failures in recent years, several former intelligence officials have said. The arrest of the former agent, Jerry Chun Shing Lee, 53, capped an intense F.B.I. investigation that began around 2012 after the C.I.A. began losing its informants in China."
"Three-quarters of the members of a federally chartered board advising the National Park Service abruptly quit Monday night out of frustration that Interior Secretary Ryan Zinke had refused to meet with them or convene a single meeting last year. The resignation of nine out of 12 National Park System Advisory Board members leaves the federal government without a functioning body to designate national historic or natural landmarks. It also underscores the extent to which federal advisory bodies have become marginalized under the Trump administration."
"House GOP leaders on Tuesday night pitched a new strategy to avert a looming government shutdown that includes children's health funding and the delay of ObamaCare taxes. Lawmakers need to pass a short-term stopgap bill by midnight Friday, when money for the federal government runs out. The latest GOP plan would keep the government’s lights on through Feb. 16, and be coupled with a six-year extension of funding for the popular Children's Health Insurance Program (CHIP). The continuing resolution or CR would also delay ObamaCare's medical device and Cadillac taxes for two years, and the health insurance tax for one year starting in 2019."
"A key Senate negotiator and White House official on Tuesday expressed little hope for an immigration deal this week but nonetheless predicted that Congress can avoid a government shutdown." Marc Short, the White House Capitol Hill liaison, said he's optimistic about a deal on DACA overall, but not this week. Senate Majority Whip John Cornyn also said he doubts an agreement can be made before week's end.