Hopes for national Internet sales tax legislation was renewed Wednesday when two influential members of the House Judiciary Committee released a list of seven principles they said must guide any discussion of such legislation in the House.


“The aim of the principles is to provide a starting point for discussion in the House of Representatives,” said House Judiciary Committee Chairman Bob Goodlatte (R-Va.). “I greatly look forward to hearing fresh approaches to this issue and continuing the discussion.”

Goodlatte was joined by Spencer Bachus (R-Ala.), chairman of the Subcommittee on Regulatory Reform, Commercial and Antitrust Law Chairman.


The announcement marks the most encouraging sign of support for legislation in the House, which has rejected the Marketplace Fairness Act passed by the Senate in May. Among other things, that bill would supersede a 1992 Supreme Court ruling that said state’s cannot collect sales taxes from out-of-state, or remote, sellers unless the seller has a physical presence, or nexus, in their jurisdiction. Many House Republicans have pledged not to support the bill, arguing it would impose burdensome reporting costs on small businesses and raise taxes.
 
The National Retail Federation, which represents the country’s national retailers, welcomed the announcement as a sign that rational debate will ensue in the House. The NRF, has been lobbying for such a law since the 1992 Supreme Court ruling, noting that national retailers prefer a certain and uniform set of rules over a patchwork of state laws, court rulings and settlement that have emerged across the country.


In 2011, for instance, California passed a law authorizing it to collect sales taxes from any remote seller who sold through a marketing affiliate located in the state. Amazon launched a ballot initiative to repeal the law, but ultimately reached a settlement that has become a template for other states. Under these agreements, Amazon agrees to collect and remit sales taxes and build a regional distribution center emloying hundreds or even thousands of workers in exchange for a guarantee that the state will not pursue back taxes. Other major e-tailers, such as eBay, have not pursued this strategy, however, and continue to oppose federal legislation.


“The National Retail Federation welcomes the release of these principles and appreciates the House Judiciary Committee’s continuing dedication to, and leadership on this retail industry priority,” said David French, NRF’s senior vice president for government relations. “NRF looks forward to analyzing and discussing these principles with our members, and remains confident that Congress will address the unlevel playing field this legislative session.”



Supporters note that the Marketplace Fairness Act does not create any new taxes. Rather it gives state the authority to  collect an existing tax from remote sellers who have so far avoided it. One of the biggest objections to the act is that it would force independent retailers to calculate the tax rates for more than 9,000 U.S. sales tax jurisdictions, but some say retailers can easily outsource that task to e-commerce vendors already providing the service to national bricks-and-mortar retailers.


“I don’t think it’s going to be expensive [to implement],” said Andrew Brewer, owner of Onion River Sports, a multi-channel retailer based in Vermont. “And I do not think it will be difficult. My little business, I bet you I could, I can go inside my system and change codes and toggle switches to start collecting the different sales taxes and it won’t take me half a day.”

 

The principles outlined by Goodlatte and Bachus Wednesday include:


  1. Tax Relief – Using the Internet should not create new or discriminatory taxes not faced in the offline world. Nor should any fresh precedent be created for other areas of interstate taxation by States.

  2. Tech Neutrality – Brick & Mortar, Exclusively Online, and Brick & Click businesses should all be on equal footing. The sales tax compliance burden on online Internet sellers should not be less, but neither should it be greater than that on similarly situated offline businesses. 

  3. No Regulation Without Representation – Those who would bear state taxation, regulation and compliance burdens should have direct recourse to protest unfair, unwise or discriminatory rates and enforcement. 

  4. Simplicity – Governments should not stifle businesses by shifting onerous compliance requirements onto them; laws should be so simple and compliance so inexpensive and reliable as to render a small business exemption unnecessary.

  5. Tax Competition – Governments should be encouraged to compete with one another to keep tax rates low and American businesses should not be disadvantaged vis-a-vis their foreign competitors. 

  6. States' Rights – States should be sovereign within their physical boundaries. In addition, the federal government should not mandate that States impose any sales tax compliance burdens.

  7. Privacy Rights – Sensitive customer data must be protected.