The Senate Is Trying to Tax What You Buy Online — Again

A group of senators has offered a new bill that would widen states’ ability to tax online purchases.

The Amazon homepage appears on a screen in Washington on September 3, 2010.
National Journal
Dustin Volz
July 16, 2014, 10:01 a.m.

Your In­ter­net ac­cess will soon be forever free from gov­ern­ment taxes — un­less the Sen­ate gets in the way.

Boost­ers of tax-free In­ter­net con­nec­tions barely had time to cel­eb­rate a ma­jor win in the House this week be­fore a threat to its sur­viv­al emerged overnight in the up­per cham­ber.

On Tues­day, the House passed a bill by voice vote that would make per­man­ent an ex­pir­ing ban on fed­er­al, state, and loc­al tax­a­tion of In­ter­net ac­cess. The pop­u­lar meas­ure is primed and ready for con­sid­er­a­tion in the Sen­ate, where a sim­il­ar bill sponsored by Sen. Ron Wyden has tal­lied more than 50 co­spon­sors.

But just hours after the House bill passed, a group of bi­par­tis­an sen­at­ors in­tro­duced a new bill link­ing the tax ban to a more com­plic­ated and con­tro­ver­sial push to strengthen the power of states to tax on­line pur­chases of items like books, fur­niture, and elec­tron­ics to help close budget short­falls.

The swift man­euver amounts to a last-ditch ef­fort to re­vive the stalled on­line-sales-tax le­gis­la­tion, which passed the Sen­ate last year but has gained little trac­tion since. But it also cleaves the co­ali­tion that sup­ports a morator­i­um on tax­ing In­ter­net ac­cess — and it could prove a bur­den­some hurdle that stalls any ex­ten­sion from reach­ing the pres­id­ent’s desk be­fore the ban ex­pires later this year.

The Mar­ket­place and In­ter­net Tax Fair­ness Act, in­tro­duced by Re­pub­lic­an Sen. Mi­chael En­zi, Sen­ate Ma­jor­ity Whip Sen. Dick Durbin, and a hand­ful of oth­ers, would al­low states to levy a sales tax on on­line pur­chases from out-of-state re­tail­ers. Cur­rent law dic­tates that states can­not en­force a sales tax on on­line mer­chand­ise bought from a com­pany that does not have a phys­ic­al loc­a­tion with­in the same state.

In ad­di­tion, the bill would ex­tend for 10 years the morator­i­um on tax­ing In­ter­net ac­cess, which is set to ex­pire Nov. 1. Un­like the House of­fer­ing, it would not make the tax ban per­man­ent.

The plan to broaden states’ abil­ity to tax on­line sales has been per­col­at­ing in Con­gress for years, and it has earned in­flu­en­tial back­ing from tra­di­tion­al re­tail­ers as well as the on­line be­hemoth Amazon. Oth­er on­line re­tail­ers such as eBay and a num­ber of an­ti­tax groups op­pose the meas­ure.

But des­pite the Sen­ate ac­tion last year, the House has yet to act on the mat­ter. The Per­man­ent In­ter­net Tax Free­dom Act that passed the lower cham­ber on Tues­day was viewed as a pos­sible piggy­back ride for an on­line-sales-tax amend­ment. But House Ju­di­ciary Com­mit­tee Chair­man Bob Good­latte, the bill’s spon­sor, has res­isted at­tempts to tack it on, des­pite a hear­ing in March ex­amin­ing the is­sue.

Adding pres­sure to En­zi and Durbin’s ef­fort: Mak­ing the tax ban on In­ter­net ac­cess per­man­ent, as the House bill does, means law­makers might not have an­oth­er chance to lever­age the is­sue to pro­mote an on­line-sales tax.

But in­dic­a­tions are that Good­latte and House lead­er­ship feel they have a strong hand, bolstered by the loom­ing dead­line on the ac­cess-tax morator­i­um. Fol­low­ing the in­tro­duc­tion of the Sen­ate bill, Good­latte re­it­er­ated in a state­ment his hope that the up­per cham­ber would pass a clean ver­sion of his per­man­ent ban be­fore the morator­i­um ex­pires Nov. 1.

Wyden, the cham­pi­on of the Sen­ate’s tax-ac­cess ban, used a state­ment ap­plaud­ing the House’s ac­tion to take a force­ful swipe at any ef­fort to pair it with an on­line-sales-tax meas­ure.

“It is so im­port­ant to re­ject ap­proaches like the Mar­ket­place Fair­ness Act that passed the Sen­ate last year, which would fun­da­ment­ally dis­crim­in­ate against states that do not levy a sales tax and against U.S. com­pan­ies versus their for­eign com­pet­it­ors,” the Ore­gon Demo­crat said. “It would amount to a body blow to on­line re­tail­ers and ser­vices across the coun­try.”

Wyden chairs the Sen­ate Fin­ance Com­mit­tee, which holds jur­is­dic­tion over on­line tax is­sues. Op­pon­ents of on­line-sales-tax le­gis­la­tion ex­pect Wyden and Good­latte to work in tan­dem to block an amend­ment to their clean tax-ac­cess meas­ure.

Re­tail­ers and oth­ers lob­by­ing hard for the on­line-sales tax still be­lieve there is a way for­ward, however, and they in­sist the le­gis­la­tion is a “near cous­in” of the push to ban In­ter­net-ac­cess taxes. And hav­ing Durbin — the second-most power­ful Demo­crat in the Sen­ate — on their side provides some ne­ces­sary muscle that could help the meas­ure over­come op­pos­i­tion from Wyden and the House.

“I’m not that con­cerned about this end­ing in a stale­mate,” said Dav­id French, seni­or vice pres­id­ent of gov­ern­ment af­fairs at the Na­tion­al Re­tail Fed­er­a­tion. “I think there’s a path for­ward, and our Sen­ate spon­sors are com­mit­ted to get­ting this done.”

What We're Following See More »
STAFF PICKS
What the Current Crop of Candidates Could Learn from JFK
1 days ago
WHY WE CARE

Much has been made of David Brooks’s recent New York Times column, in which confesses to missing already the civility and humanity of Barack Obama, compared to who might take his place. In NewYorker.com, Jeffrey Frank reminds us how critical such attributes are to foreign policy. “It’s hard to imagine Kennedy so casually referring to the leader of Russia as a gangster or a thug. For that matter, it’s hard to imagine any president comparing the Russian leader to Hitler [as] Hillary Clinton did at a private fund-raiser. … Kennedy, who always worried that miscalculation could lead to war, paid close attention to the language of diplomacy.”

Source:
STAFF PICKS
Maher Weighs in on Bernie, Trump and Palin
1 days ago
WHY WE CARE

“We haven’t seen a true leftist since FDR, so many millions are coming out of the woodwork to vote for Bernie Sanders; he is the Occupy movement now come to life in the political arena.” So says Bill Maher in his Hollywood Reporter cover story (more a stream-of-consciousness riff than an essay, actually). Conservative states may never vote for a socialist in the general election, but “this stuff has never been on the table, and these voters have never been activated.” Maher saves most of his bile for Donald Trump and Sarah Palin, writing that by nominating Palin as vice president “John McCain is the one who opened the Book of the Dead and let the monsters out.” And Trump is picking up where Palin left off.

Source:
×