INTERNET RETAILERS: Goodlatte reopens sales tax debate
Daily News Leader By Mary Orndoff March 12, 2014
WASHINGTON — Senate-passed legislation to collect more sales taxes on online purchases is flawed, U.S. Rep. Bob Goodlatte, R-6th, said Wednesday.
Goodlatte, chairman of the House Judiciary Committee, made his comments at a committee hearing that debated different ways to make the sales tax playing field fairer for traditional storefronts without burdening Internet-only retailers.
Goodlatte gave no indication he plans to consider the Marketplace Fairness Act, which passed the Senate with bipartisan support last year and has been endorsed broadly by retailers, governors and state lawmakers.
He said Wednesday’s hearing was instead intended to help the committee winnow down the list of alternatives to the Senate plan and come up with its own legislation.
“The issue is just far more complex than it seems at first glance,” Goodlatte said.
The Marketplace Fairness Act would allow states to require online retailers to collect sales taxes even if they don’t have a physical presence in the state where the buyer lives. Brick-and-mortar retailers say too many consumers are using their stores to shop — but not buy — because they can purchase the same products online without paying sales tax.
Current law requires consumers to pay sales taxes on online purchases to their state, but it rarely happens and is not enforced.
In 2012, states estimated they were missing out on $23 billion in lost sales tax revenue.
Goodlatte said the Senate plan has three main flaws:
The public considers it an unfair tax on the Internet.
The computer software needed to collect and remit sales taxes to thousands of different jurisdictions is too complicated and expensive to integrate into business operations.
It would subject online retailers to tax audits in places where they are not physically located.
“That said, the committee is sympathetic to the plight of traditional retailers,” Goodlatte said. “If Congress is to act, it must do so deliberately and precisely to avoid a cacophony of 9,600 taxing jurisdictions fighting over what is required.”
The ideas proposed by a panel of legal and tax witnesses varied widely.
Creating a federal database of sales data to give buyers aggregate information about taxes owed so they can self-report.
Prohibiting shipments of goods into any state in violation of that state’s tax laws.
Requiring collection of sales tax based on the physical location of the seller, not the buyer.
A voluntary compact in which states collect sales taxes from sellers based in their states and send it to states where buyers live.
Expanding the Streamlined Sales and Use Tax Agreement to include more states and interstate transactions.
Republicans and Democrats debated the ideas for several hours, weighing concerns over privacy, state sovereignty, legal liability and fairness to all kinds of retailers.
“Competitors should compete on things other than sales tax policy,” said Rep. John Conyers of Michigan, the top Democrat on the panel. “We should ensure competitive equity among retailers and level the playing field.”
Goodlatte declined to comment after the hearing and did not say which idea he preferred.
Even organizations that support the Senate-passed Marketplace Fairness Act said Goodlatte’s interest in other ideas is welcome.
“We certainly consider other workable solutions to this problem to be possible,” said Betsy Laird, senior vice president of global public policy at the International Council of Shopping Centers.
A group of small-business owners from around the country — including business owners in his congressional district, such as Roanoke Animal Hospital, Fleet Feet Sports in Roanoke and Roanoke Cycle Sports Inc. — urged Goodlatte to move legislation this year.
“Let us compete on true price, service and selection without government’s thumb on the scale,” they wrote. “It’s time to update our sales tax laws to reflect the economic and technological realities of the 21st century.”