There’s already a GOP rift over how, or whether, to implement online sales taxes. That divide may very well widen later this month in the House Judiciary Committee.
Committee member Jason Chaffetz (R-Utah) said in an interview last week that he expects to introduce a remote taxation bill before July. That could put him at loggerheads with committee chairman Bob Goodlatte (R-Va.), who is in the midst of working on a competing measure.
The two proposals, which have been circulated to stakeholders, differ in terms of which tax they would apply to goods purchased online.
Chaffetz’s draft and a related Senate bill, S. 698, dubbed the Marketplace Fairness Act, would base rates on the sales tax of the consumer’s home state and remit the taxes from the company’s home state. Goodlatte’s proposal would apply the sales tax of the state where the company is based.
Chaffetz, who is working with Rep. Steve Womack (R-Ark.) on the measure, said his approach has broad support.
“The states are begging for this,” he said Thursday. “There’s an issue of fairness and parity that must be addressed. So obviously I like what we’re putting together, but we’ll introduce it sooner rather than later.”
Both the National Conference of State Legislatures and the National Governors Association have written to Speaker John Boehner (R-Ohio) this year to criticize Goodlatte’s approach, known as origin sourcing, preferring instead the provisions of the Marketplace Fairness measure.
Goodlatte declined to comment Thursday when asked whether he would let the committee vote on Chaffetz’s forthcoming bill. He also did not say when he expects to introduce his own legislation.
During a House Judiciary subcommittee hearing last Tuesday, Goodlatte said he is “eager to proceed with legislation that levels the playing field between traditional and online retailers without letting states tax beyond their borders. Productive discussions continue.”
Opposition to Goodlatte’s approach is strong in some circles.
“You need to apply the taxes of where you live, not where you buy from,” said Robert Atkinson, president of the Information Technology & Innovation Foundation, a tech policy think tank. “Because if you don’t do that, if you make it so that it’s based on the origin of a product, everybody’ll be in Delaware,” he added, referring to one of five states with no sales tax.
Some Democrats on the House Judiciary Committee, which has jurisdiction over interstate commerce issues, have already voiced support for Chaffetz’s approach.
“The Marketplace Fairness Act is the most direct and equitable way of bringing parity to brick and mortar sales versus internet sales,” Rep. Hank Johnson (Ga.), ranking member of the Subcommittee on Regulatory Reform, Commercial and Antitrust Law, said in an interview Wednesday.
But not all stakeholders favor the destination-sourcing approach.
Steve DelBianco, executive director of NetChoice, an e-commerce trade group that includes eBay and Google among its members, said the Chaffetz proposal “lets every state tax administrator reach any business anywhere in the country with an audit or a demand letter.”
He said Goodlatte’s approach would avoid these problems.
“Goodlatte’s proposal treats remote sellers the same as local sellers by allowing them to follow the rules and do filing wherever their store is located,” DelBianco said. “That’s the same process we use when we walk up to the counter to buy anything in a local store.”
Chaffetz said Thursday that his bill modifies provisions in the Marketplace Fairness Act passed by the Senate in 2013.
“Compared to what the Senate passed out with their MFA, we put strong provisions in to limit the auditing capability of other states. As long as you use the certified software provider, than those audits would be eliminated.
It’s still unclear whether an online tax bill in the House can succeed where the Marketplace Fairness Act failed in the 113th Congress.
The Senate passed its version 69-27 in 2013. Boehner declined to put the measure on the House floor for a vote that year.