WASHINGTON -- U.S. Rep. Steve Womack filed legislation Monday that would require retailers to collect and remit online sales taxes to local governments.
Womack and other members of Arkansas' delegation have supported similar bills, previously known as the Marketplace Fairness Act, for years. It would allow states to collect sales taxes from retailers that sell products online to people in that state even if the retailer doesn't have a physical presence there. The states would have to offer free software to help companies collect and remit the taxes.
Meeting with reporters Monday, Womack, a Republican from Rogers, and U.S. Rep. Jason Chaffetz, R-Utah, announced H.R. 2775, the Remote Transactions Parity Act of 2015, had been filed.
In March, U.S. Sen. Mike Enzi, R-Wyo., sponsored similar legislation in the Senate. The bill, co-sponsored by U.S. Sen. John Boozman, a Republican from Rogers, and 21 others was referred to the Senate Finance Committee.
"This has never been, from my perspective, a revenue issue," Womack said. "This has always been a fairness issue, trying to create a level playing field so that the retail merchants on Main Street across the country do not become disadvantaged because of a loophole that would favor an out-of-state company."
The U.S. Supreme Court's 1992 decision in Quill Corp. v. North Dakota held that, absent a change in federal law, a state cannot make retailers that have no physical locations in that state collect sales taxes. Under current law, consumers are required to pay the sales taxes on online purchases, but few of them do.
Womack said Congress' inaction has left a loophole in state and local tax structure for two decades, which has gotten worse as more people purchase goods online.
"There are a lot of small retailers out here ... and a good number of them just simply cannot compete with remote transactions that are happening, that are taking their business away," he said. "The Supreme Court in 1992 highlighted a problem and ... Congress has failed to answer that suggestion now for 20-plus years and we just think it's critical that it be addressed."
Supporters say it is a fairness issue because businesses that have physical locations in a state have to charge sales taxes, while out-of-state online retailers don't. That puts local businesses at a competitive disadvantage, and local governments lose the sales-tax revenue that could be used to provide public services, they say.
Opponents say a state shouldn't be allowed to require a business operating in another state to pay local taxes. Each state has different state and local tax rates, and it is burdensome to keep track, they say.
The National Taxpayers Union is disappointed by the bill, the group's executive vice president, Brandon Arnold, said.
"It needs to be approached in one way or another, but the Chaffetz approach and the Marketplace Fairness Act approach aren't the right ways to go," he said.
Instead of requiring businesses to collect taxes based on the tax rate where the person buying something lives, the Taxpayers Union supports requiring businesses to charge the sales tax rate of the state the business is located in, he said. Five states have no sales tax, and businesses in those states wouldn't be compelled to charge sales tax.
"From a retailer's perspective it's no different for them if somebody walks into your store and purchases something or if somebody comes to your online store and purchases something," Arnold said. "It's effectively the same compliance cost."
That method is supported House Judiciary Committee Chairman Bob Goodlatte, R-Va., who is working on his own legislation to resolve the issue, but Chaffetz said it would be harder to achieve tax parity that way. Goodlatte's objections have blocked Womack's attempts in the past.
"The same person buying the same good in the same state should probably pay the exact same amount [of tax, regardless of the state where the online retailer is based]," he said.
Legislation to address the unpaid tax has been brought repeatedly in the past few years. As the 113th Congress wound down in December, retail and other business groups pushed House leaders, unsuccessfully, to consider Womack's legislation. The Senate had already approved its version, co-sponsored by Boozman and then-U.S. Sen. Mark Pryor, a Democrat from Little Rock.
Womack said House leaders have since said that they recognize the online sales tax issue needs to resolved and are looking for legislation that would have bipartisan support.
The bill filed Monday addresses several concerns from previous versions, Chaffetz said. It restricts states from auditing a business in another state; exempts businesses with gross annual receipts under $10 million the first year, under $5 million the second year, and $1 million the third year; and in most cases holds the tax collection software provider liable for all regulation and compliance costs.
Chaffetz and Womack produced letters and signs of support from hundreds of retail and e-commerce businesses, including Wal-Mart, Amazon and Overstock.com, as well as national and state trade associations.
Business on 06/16/2015
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