Chaffetz Has Voters in His Corner, and Not Goodlatte’s, for Online Tax Bill

Rep. Jason Chaffetz (R-Utah) on Monday introduced a measure to levy online sales taxes, along with a three-page list of trade associations and companies that support his approach. He can add another group to that list: voters.

A recent Morning Consult poll found voters leaning toward Chaffetz’s approach, which would allow sales tax collections based on the rate consumers pay in their home state. That strategy differs from one taken by House Judiciary Committee chairman Bob Goodlatte (R-Va.), who wants to base sales tax rates on where the seller is located.

Forty-two percent of registered voters said goods purchased on the internet should be taxed based on the sales tax rate in the home state of buyer, while 31 percent said the rate should correspond with the seller’s home state.

Overall, voters rejected the idea of taxing goods purchased online, with 60 percent opposing the idea and 30 percent supporting it.

However, in a second poll, 45 percent of voters said that if a tax is levied, the revenue should go to the state where the consumer resides, compared with 25 percent who said it should go to the business’ home state.

Both the Chaffetz bill and Goodlatte’s proposal would remit taxes to the consumer’s home state.

Currently, states are restricted to taxing businesses that have a physical presence within their borders, a standard set by the 1992 Supreme Court decision in Quill Corp. v. North Dakota.

But states rights groups have been clamoring to close what they describe as a tax loophole, and a bipartisan push to allow states to tax online purchases has made strides. In 2013, the Senate passed the Marketplace Fairness Act, a destination-sourcing internet tax bill, on a 69-27 vote. House Speaker John Boehner (R-Ohio) declined to bring the bill to the floor for a vote during the 113th Congress.

Sen. Mike Enzi (R-Wyo.) introduced the bill, S. 698, again in March. The measure has bipartisan support among its 22 cosponsors.

Chaffetz’s bill has eight Republicans and eight Democrats as cosponsors, including Rep. John Conyers Jr. (D-Mich.), the ranking member of the Judiciary Committee.

It also boasts support from prominent the National Governors Association and the National Conference of State Legislatures, along with trade groups and online vendors such as Amazon.com Inc. and Overstock.com Inc.

Stephen Schatz, media relations director for the National Retail Federation, a coalition of retailers that counts Wal-Mart among its members, said Goodlatte’s origin-based sourcing model could prove difficult to implement and lacks the necessary input and support of states.

He said NRF prefers a plan that sets taxes based on a consumer’s place of residence.

Goodlatte’s office did not respond to a request for comment.

Critics of Chaffetz’s measure say it would complicate tax compliance for small businesses by forcing them to cope with different state tax regimes. Further, they say it would pave the way for states to conduct tax audits outside their borders.

Subjecting retailers to multiple state audits would mean bankruptcy for several small businesses that rely on online income, said Phil Bond, executive director of the Web Enabled Retailers Helping Expand Retail Employment coalition, or WE R HERE, which represents more than 14,000 small businesses.

“There’s nothing there to like for small retailers,” he said of the Chaffetz measure. ‘There’s a lot there to like for big retailers and tax collectors.”

In a June 4 interview, Chaffetz said businesses would be immune from such audits if they use specialized software prescribed in the bill.

In a statement yesterday he said the bill was “generous to small remote sellers and puts our neighborhood retailers on a level playing field – without completely changing our current state sales and use tax structure.” He also said that states would be required to provide sellers with the specialized software, and pay for its installation and maintenance, so that retailers don’t need to calculate the different tax rates themselves.

The first poll was conducted from June 5 through June 8 among a national sample of 2,906 registered voters. The second was conducted from June 12 through June 15 among a national sample of 2,039 registered voters.

Results from both surveys have a margin of error of plus or minus 2 percentage points.