Bloomberg News

Republicans’ Online Sales Tax Principles Satisfy Both Sides (1)

September 18, 2013

Advocates and opponents of letting states require out-of-state retailers to collect sales taxes praised a set of principles from House Republicans.

Representative Bob Goodlatte, chairman of the House Judiciary Committee, today released seven principles that will guide his approach to the issue. He wants legislation to be simple so that an exemption for small businesses is unnecessary and wants a measure to include a way for retailers to protest tax rules set by states where they don’t have operations.

“Americans across the country are affected by the issue of Internet sales tax whether they are consumers or business owners,” the Virginia Republican said in his most substantive comments since the Senate passed an online sales tax bill May 6. “The aim of the principles is to provide a starting point for discussion in the House of Representatives. I greatly look forward to hearing fresh approaches to this issue.”

The online sales tax issue has avoided the typical partisan split in Congress. The Senate bill passed on a 69-27 vote with Republicans almost evenly divided.

States lose an estimated $23 billion a year in revenue in uncollected sales taxes.

The Senate bill exempted businesses with less than $1 million a year in out-of-state sales. States would be required to join an interstate compact with streamlined rules or provide software to retailers.

Among Goodlatte’s principles are avoiding a precedent for other interstate taxes, encouragement of state tax competition and protection of customer privacy.

‘Broken’ System

Supporters include Wal-Mart Stores Inc. (WMT:US), Amazon.com Inc. (AMZN:US) and most Democrats, who maintain that brick-and-mortar businesses face unfair, untaxed competition.

“These principles make clear that the current system is broken, and that the chairman is committed to closing the online sales tax loophole once and for all,” said Bill Hughes, senior vice president for government affairs at the Retail Industry Leaders Association, whose members include Target Corp. (TGT:US) and Dollar General Corp. (DG:US) “Those who have sought to preserve special treatment in the tax code and have fought reform are fighting a losing battle.”

Opponents include anti-tax groups, direct marketing representatives from states without sales taxes and EBay Inc. (EBAY:US) They warn about compliance costs and say customers would pay more.

“EBay is very encouraged that the remote sales tax principles released today by Chairman Goodlatte address concerns that we have raised on behalf of our small business community,” Brian Bieron, the company’s executive director of global public policy, said in a statement. “The principles create a sensible starting place.”

Goodlatte set no timeline for committee action.

The bills are S. 743 and H.R. 684.

To contact the reporter on this story: Richard Rubin in Washington at rrubin12@bloomberg.net

To contact the editor responsible for this story: Jodi Schneider at jschneider50@bloomberg.net


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