Online sales tax debate reignited in the House

GOP lawmakers reignited the online sales tax debate on Monday, rolling out a new bill that they said could assuage previous Republican concerns about the issue.

The bill, from House Oversight Chairman Jason Chaffetz (R-Utah) and a group of 15 other House members, would give states greater latitude to charge sales taxes on online purchases from out-of-state customers.

{mosads}But supporters say it also improves upon previous online sales tax legislation, called the Marketplace Fairness Act, that made it through the Senate last Congress before getting stonewalled by House GOP leaders.

“We think this is a viable solution. What we’re trying to do is empower states to make these types of decisions,” Chaffetz told reporters at a Monday briefing, alongside Rep. Steve Womack (R-Ark.), an original co-sponsor of the measure.

Chaffetz and Womack both stressed that their bill would finally bring parity to the issue of taxing online sales. The Supreme Court has said that states can only collect sales taxes from companies that have a physical location within their borders.

Retail groups and their supporters have long said that online stores that aren’t forced to charge sales taxes get an unfair subsidy from the government.

“The same person, buying the same good, in the same state should probably pay the exact same amount of tax,” Chaffetz said.

The Utah Republican also noted that Overstock, which is headquartered in his district, is also backing his legislation — joining Amazon in supporting a federal solution.

Still, supporters of the new bill acknowledged they face a tough task in getting their measure passed anytime soon.

Both Speaker John Boehner (R-Ohio) and Senate Majority Leader Mitch McConnell (R-Ky.) have shown little interest in the issue, which divides Republicans far more than it does Democrats.

Most Democrats back online sales tax legislation, while some of the Marketplace Fairness Act’s loudest critics were GOP presidential contenders like Sens. Ted Cruz (Texas) and Rand Paul (Ky.).

And House Judiciary Chairman Bob Goodlatte (R-Va.), whose committee has jurisdiction over the online sales tax issue, has proposed far different solutions from Chaffetz’s new bill.

Under a draft proposal Goodlatte circulated in January, retailers would charge sales taxes based on their own local rate. The new bill from Chaffetz and the Marketplace Fairness Act would allow states to levy taxes based on where the customer lives.

Goodlatte has also expressed concerns about protecting small businesses from audits, and that exempting certain small sellers would make a bill too complicated.

Chaffetz and Womack said they kept those concerns in mind when crafting their new bill, which would phase out a small seller exemption and give states less power to audit out-of-state businesses.

But early returns suggest that the bipartisan group of sponsors have not won over Goodlatte or longtime critics in the tech world, like NetChoice.

A House Judiciary aide said that Goodlatte appreciated Chaffetz’s effort, but “does not believe that the approach taken by Rep. Chaffetz is constructive because it would proactively permit states to tax and regulate businesses beyond their borders.”

Chaffetz and Womack both said it would take time for their state’s rights message to win the day with Republicans, who are wary of anything that can be construed as raising taxes.

“I just want people to read the legislation. Read it. Understand it. And don’t go to the bumper sticker politics, the talking point that just says ‘Oh, you’re trying to tax the Internet,’ ” Womack said.