Mnuchin: Trump administration examining online sales tax issue

Treasury Secretary Steven Mnuchin said Wednesday that the Trump administration expects to take a stance on the online sales tax issue in the near future.

“This is an issue that we’ve been looking at very carefully within the administration, and we expect to come out with a position shortly,“ Mnuchin said at a Senate Appropriations Committee hearing.

The Supreme Court ruled in 1992 that states can only require retailers to collect their sales taxes if the companies have a physical presence in the state. However, the court also said that it’s up to Congress to ultimately resolve the issue of remote sales taxes.

{mosads}Retailers and state and local governments have been pressing Congress to pass legislation that would allow states to require out-of-state online retailers to collect their sales taxes. The Senate passed bipartisan legislation along these lines in 2013, called the Marketplace Fairness Act, but the issue has stalled because lawmakers are divided.

Mnuchin said that tax revenue from online purchases could be an important funding source for states for infrastructure.

“We understand the issue and we do think that the states getting more money in one format or another is very important,” he said.

Mnuchin said he’s also encouraged that Amazon is now collecting taxes on its own sales, though it isn’t collecting taxes on sales by third-party vendors.

President Trump recently criticized the Washington Post, which is owned by Amazon founder Jeff Bezos, by calling it “the guardian of Amazon not paying internet taxes (which they should).” However, it’s not clear what Trump meant by “internet taxes” in his tweet.

Mnuchin noted that many states require people to pay use taxes on online purchases when taxes aren’t collected at the time of the purchase.

“This is really more a function of collection,” he said.

But Sen. Dick Durbin (D-Ill.) said that “compliance is very low” on use taxes because taxpayers declare them voluntarily, and “if you have collection at point of sale, it’s dramatically different.”

Sen. Joe Manchin (D-W.Va.), a former governor who is up for reelection in 2018 in a state Trump won, also argued that legislation like the Marketplace Fairness Act is necessary.

That type of legislation could be “almost a salvation to most of the states, especially rural states,” he said.

The questions to Mnuchin about the online sales tax issue come one day after the House Judiciary Committee held a hearing on legislation that would codify the 1992 Supreme Court ruling and prevent states from requiring out-of-state retailers to collect their sales taxes.

That bill, the No Regulation Without Representation Act, is sponsored by Jim Sensenbrenner (R-Wis.) and also has the support of House Judiciary Committee Chairman Bob Goodlatte (R-Va.).

Goodlatte said the bill would protect states’ rights. But other GOP lawmakers and Democrats expressed concern that the bill would hurt states’ budgets and authority.