House chairman circulates online sales tax draft

House Judiciary Chairman Bob Goodlatte (R-Va.) circulated a long-awaited discussion draft on taxing online sales this week, lobbyists and congressional aides told The Hill.

The draft from Goodlatte and Rep. Anna Eshoo (D-Calif.) breaks from online sales tax legislation that passed the Senate in 2013, instead giving states more limited power to tax online sales.

A House Judiciary aide said the discussion draft would “serve as a starting point for discussion on the Internet sales tax issue.” 

Under the discussion draft, only states that joined a multi-state clearinghouse would have the authority to collect sales tax revenue on out-of-state purchases, according to a draft obtained by The Hill. Retailers would also charge sales taxes based on their own state and local rates – not the rate of the customer’s. The clearinghouse would then divide the sales tax revenue among its member states.

The draft would also only allow retailers to be audited by their own state government, answering another concern of opponents of the Marketplace Fairness Act that passed the Senate in May 2013. Under that measure, states could collect sales taxes from out-of-state retailers on purchases made by their own residents.

Under current law, states can only collect from businesses that have a physical location within their borders.

Goodlatte released principles for online sales tax legislation in 2013, but did not turn them into a bill in the last Congress – much to the disappointment of lobbyists and lawmakers seeking to get a bill to President Obama’s desk. House Speaker John Boehner (R-Ohio) declined to bring the Senate bill up for a vote last year, but also vowed that the GOP would work on the issue this year. Rep. Jason Chaffetz (R-Utah) is also working on the issue.

The draft is unlikely to find much support among retail groups that have lobbied for the Marketplace Fairness Act. But Steve DelBianco of NetChoice, which has opposed that measure, said the draft could become the basis of a deal.  

“With elegant simplicity, this bill treats sales tax obligations the same, whether you entered a store by foot, by mail, by phone, or via the Internet,” DelBianco said. “In short, this bill represents a compromise that gives states the revenue they’re missing, without punishing every small business that goes online to reach customers around the country.” 

EBay, which was a vocal opponent of the Marketplace Fairness Act last year and is a member of NetChoice, echoed tentative support for the draft bill.

In a statement to The Hill, eBay spokeswoman Amanda Miller said that the new proposal “better protects small businesses using the Internet.”

Julian Hattem contributed.