Online Sales Tax Closer Than Ever, Proponents Say

A leading House Republican has introduced a bill that requires e-tailers to collect sales tax, increasing the chance that this long-debated proposal may finally become law.

The Marketplace Fairness Act (MFA) passed the Senate in 2013 but ended up stalled in the House of Representatives. 

On June 15, Rep. Jason Chaffetz (R-Utah), chairman of the House Oversight and Government Reform Committee, introduced the Remote Transactions Parity Act. The new bill is similar to the MFA but contains further protections for e-tailers and other remote sellers:

– It requires states provide remote sellers with free sales tax collection software, cover setup, installation, and maintenance costs.

– It exempts companies with less than $5 million in annual business from remote state audits.

– The MFA exempted businesses with less than $1 million in annual receipts from tax collection. The new bill in its first year exempts businesses under $10 million; that transitions to $5 million in the second year and $1 million in the third. 

The bill’s introduction won applause from retail groups that have long called for sales tax fairness, including Jewelers of America. The group’s political action committee, JAPAC, is currently having members visit Washington D.C., to meet with Chaffetz and other legislators to express support for the bill. 

“[The bill’s introduction] is a key moment in the fight to level the playing field for brick-and-mortar jewelers,” said JA president and CEO David Bonaparte in a statement. 

While the bill has garnered 15 cosponsors from both parties, National Journal predicted the debate over online sales taxes will end up “as messy as ever,” as many Tea Party–affiliated representatives remain suspicious of anything that could be considered a tax hike. (Supporters counter that the legislation simply enforces existing taxes.) 

The bill has also not been endorsed by Rep. Bob Goodlatte (R-Virg.), chairman of the House Judiciary Committee, whose support is considered crucial. A House Judiciary aide told The Hill that Chaffetz’s approach was not “constructive.”

Goodlatte reportedly favors legislation based on origin sourcing. That would require e-tailers to collect sales tax based on where they are headquartered, rather than where the customer is located.

Other opponents include Sen. Ron Wyden (D-Ore.), who called the bill “the biggest federal intrusion into state commerce in decades.” 

He argued the bill potentially puts sensitive customer data in the hands of hackers and that it favors non-tax-collecting overseas e-tailers, who will “profit at the expense of American jobs.”

But David French, senior vice president for government relations for the National Retail Federation, said in a statement the legislation “will eliminate the online sales tax collection loophole, which distorts competition, the free market, and unfairly favors online sellers at the disadvantage and expense of local communities, merchants, and small business owners and their employees. Retailers should be free to compete for customers and sales without the federal government picking winners and losers in the marketplace.”

Editor’s note: The author’s wife is director of public affairs and education for Jewelers of America.

JCK News Director