Will This Week’s Election Make an Online Sales Tax Less Likely?

Everyone interested in the online sales tax issue needs to keep close tabs on the upcoming lame duck session of Congress—because this might be supporters’ best chance of getting legislation on this issue passed for a long long time.

Last year, the Marketplace Fairness Act—which lets states collect sales tax from remote sellers—passed the Senate with bipartisan support. But since then, shepherding the MFA through Congress has become an endless Charlie-Brown-and-the-football moment for proponents, who weren’t able to stitch together a similar collation in the lower chamber. And while Rep. Jason Chaffetz (R-Utah) has reportedly been drafting a House-friendly version of the MFA for the last year, it has yet to appear. 

This week’s Republican ballot-box victories could make the MFA even tougher to pass. While members of both parties have supported this and similar measures, Republicans have generally been far more hostile than Democrats. House Speaker John Boehner (R-Ohio) derided the MFA earlier this year, and incoming Senate majority leader Mitch McConnell (R-Ky.) voted against it.   

Which is why the upcoming lame duck session may be supporters’ last best hope for a near-term victory. Sen. Harry Reid (D-Nev.), who remains majority leader through the end of the year, has pledged to attach the MFA to likely-to-pass legislation, such as the Internet Tax Freedom Act, which prohibits state and local jurisdictions from taxing broadband. The MFA might also be tacked on to a must-pass package of tax extenders, says Chris Fetzer, vice president and general counsel for Haake & Associates, legislative counsel for pro-MFA Jewelers of America. (Disclosure: My wife works for JA.)

“Industry groups are planning an all-out advocacy blitz when lawmakers return to Washington next week,” reports The Hill. “Supporters say they will soon be regulars in both Democratic and Republican offices on both sides of the Capitol.”

“We are as close to passage in the lame duck as we have ever been,” says David French, senior vice president, government relations, for the National Retail Federation, which is pro-MFA. “We are going to make a big push because this is the best chance we have seen in a while.”

Still, he admits that, with a huge stack of legislation needing to be considered, “it is always difficult to do something in the lame duck.”

Steve DelBianco, executive director of NetChoice, an e-tail trade association that opposes the MFA, thinks the election strengthens the “hands of the Republicans. They will be very reluctant to give Harry Reid and [Senate majority whip and bill cosponsor] Dick Durbin a big win in the lame duck.” 

Brandon Arnold, executive vice president of the anti-MFA National Taxpayers Union, also believes the bill is now a far longer shot. 

“Reid and Durbin see this as their last hurrah controlling the chamber, but there isn’t much sentiment to do anything substantive in the lame duck,” he says. “House Republicans don’t want to do take this issue up. It’s just too controversial. They would rather do it working with Senate counterparts who are more in line with their thinking.”

Still, with supporters pledging to give their all, opponents also vow to be vigilant. “I find it hard to believe the bill will pass,” says Peggy Hudson, senior vice president of government affairs the Direct Marketing Association, which is also against the MFA. “But there’s always a possibility that some late night, anything may happen.”

If the topic is punted to the next Congress, the chances of the MFA passing grow even slimmer. 

“If we have to start over at square one next year, it will be hard,” admits French.

Even if the MFA is dead, the sales-tax issue will likely stay very much alive. Noting how the bill has consistently attracted bipartisan support, Fetzer believes supporters have momentum on their side.

“It was already a matter of when, not if,” he says. “I don’t think this election changes that.”

Hudson suggests her group might line up behind some measures. 

“I think everyone agrees we need to collect sales tax,” she says. “The question is, what kind of burden do you put on businesses.” 

If this issue is reconsidered, Arnold thinks the origin sourcing idea, which briefly surfaced earlier this year, might pop up again. 

“There are a lot of proposals going around,” he says. “There is far from a consensus on this issue. This should be a long, involved process.” 

Barring a surprise in the next month or so, he seems likely to get his wish.

JCK News Director