Brendan Sasso for The Hill writes: The Senate is expected to pass legislation this week that would empower states to tax online purchases. Senate Majority Leader Harry Reid (D-Nev.) has filed to end debate on the bill, which is called the "Marketplace Fairness Act." A key procedural vote is scheduled for Monday evening.
Although the bill looks to be on the fast-track for passage through the Senate, it faces a tougher battle in the House, where Judiciary Committee Chairman Bob Goodlatte (R-Va.) says he plans to take his time scrutinizing the legislation. Supporters argue the bill would close an unfair loophole that benefits online retailers over local brick-and-mortar stores.
“The Marketplace Fairness Act is a bill whose time has come in Congress and one that is long overdue for states, local governments and small businesses," Sen. Dick Durbin (D-Ill.), a sponsor of the legislation, said in an emailed statement, adding that he is confident the bill will clear the Senate.
Last month, 75 senators voted for a non-binding budget resolution amendment expressing support for allowing states to tax online retailers. Although the vote had no legal impact, it was an important demonstration of support for the legislation. Under current law, states can only collect sales taxes from retailers that have a physical presence in their state. People who order items online from another state are supposed to declare the purchases on their tax forms, but few do.
The Marketplace Fairness Act would empower states to tax online purchases but would exempt small businesses that earn less than $1 million annually from out-of-state sales.
Bringing the bill directly to the Senate floor snubs Finance Committee Chairman Max Baucus (D-Mont.), whose panel has jurisdiction over the issue. Baucus has expressed concern that the legislation would violate the rights of states that have no sales tax, like his home state of Montana.
Last month, Baucus argued in a floor speech that the proposal would "require Montana employers to spend their hard-earned dollars to enforce sales taxes in other states, with absolutely nothing in return."
"This is a clear infringement on states’ rights that we cannot stand for," Baucus declared.
Sens. Kelly Ayotte (R-N.H.) and Ron Wyden (D-Ore.), whose home states also have no sales tax, are rallying opposition to the measure.
But Sens. Mike Enzi (R-Wyo.) and Lamar Alexander (R-Tenn.), the other lead Senate co-sponsors along with Durbin, argue the bill will actually protect states' rights. They note that it would not force any state to collect taxes, and argue that states that choose to tax online purchases could lower other rates.
“Sales tax is the main source of revenue for cities, towns and counties and even the state," Enzi said in a recent statement. "It provides the money for roads, police, fire protection. If we don’t collect that revenue, they’ll have to find a new source.”
The proposal has the support of a host of GOP governors, including Chris Christie of New Jersey, Rick Snyder of Michigan and Bob McDonnell of Virginia.
But the legislation faces a long slog in the House.
In an emailed statement, Goodlatte said he is "open to considering legislation concerning this topic," but said he has concerns that would have to be addressed.
"While it attempts to make tax collection simpler, it still has a long way to go," the GOP chairman said. "There is still not uniformity on definitions and tax rates, so businesses would still be forced to wade through potentially hundreds of tax rates and a host of different tax codes and definitions." He also expressed concern that the bill could "open the door for states to tax or even regulate beyond their borders."
The House sponsors are Reps. Steve Womack (R-Ark.), Jackie Speier (D-Calif.), Peter Welch (D-Vt.) and John Conyers (D-Mich.). A coalition of anti-tax groups, including the Heritage Foundation, Americans for Tax Reform and Americans for Prosperity, sent a letter to members of Congress on Friday, urging them to reject the legislation.
Major retail groups, however, are lobbying intensely for the legislation.
David French, a lobbyist for the National Retail Federation, said the overwhelming Senate vote for the proposal as a non-binding resolution last month has helped to build momentum in both chambers.
"The 75 votes on the budget vote got everyone's attention," French said. "I think the House is a lot more interested in taking this up and passing it than they were before that vote."
He said his group and other supporters plan to work with Goodlatte to address his concerns and said the bill has significant support among the Judiciary Committee lawmakers.
Brian Bieron, a lobbyist for eBay, which opposes the bill, criticized the Senate leaders for bypassing the committee process.
"We're in favor of actual legislative procedure and scrutiny because we think complicated issues ought to actually go through a process where serious questions are asked and maybe things get better," Bieron said.
He also argued that the bill's small business exception is too small.
"A new Internet tax bill should not penalize or harm small businesses," he said.
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