A bipartisan coalition in the Senate easily passed legislation on Monday to force Internet retailers to collect sales taxes for state and local governments, sending the issue to the House, where antitax forces have vowed to kill it.
But the 69-to-27 vote in the Senate will give the measure significant momentum. Hundreds of retailers are flying to Washington this week to pressure House lawmakers and counter the arguments of small-government groups.
The Internet sales tax bill — called the Marketplace Fairness Act — is a rarity in Washington these days, a significant tax measure that has split antitax groups in Washington from reliably Republican Main Street businesses beyond the capital. That divide has given the measure at least a chance to reach President Obama, who supports it.
The legislation would allow states to force online retailers with more than $1 million in annual out-of-state sales to collect sales taxes from all customers and remit those taxes back to state and local governments. States would have to provide software to help calculate the taxes for thousands of jurisdictions.
Its sponsors intentionally kept the bill simple — just 11 pages in length — to ease passage. In contrast, the Congressional Joint Committee on Taxation on Monday released a 568-page report to the House Ways and Means Committee on options for overhauling the tax code compiled by 11 bipartisan House working groups tackling that issue. The release was intended to push forward comprehensive tax reform, but it only underscored how difficult a task that will be in a divided Congress.
The Senate Internet tax debate revolved around advocates’ arguments that applying sales taxes online is only fair, since traditional brick-and-mortar retailers must levy such taxes already. Supporters said the bill was not a tax increase but a guarantee that taxes already owed would actually be paid. The Senate, they said, was standing up for the right of states to collect taxes as they see fit.
Opponents say they will try to slow the process down in the House and shift the conversation to their issues: fears that the complexity of collecting the taxes will put many Internet retailers out of business or subject them to an avalanche of audits from state and local governments around the country.
With conservatives in Washington organizing against it, the bill faces an uphill climb in the House, but not a steep one. The House bill already has 65 co-sponsors, almost half of them Republican, and those Republicans include veteran conservatives like Representatives Joe Barton of Texas and Spencer Bachus of Alabama. Proponents point to their own conservative supporters, including Al Cardenas, chairman of the American Conservative Union, and Arthur Laffer, a conservative economist.
The House Judiciary Committee chairman, Bob Goodlatte of Virginia, has said he will at least consider the measure. After the Senate’s passage, Mr. Goodlatte made it clear he would take his time with the legislation and would insist on significant changes. He suggested he may force more uniformity in sales tax rates and add legal recourse for Internet retailers facing multiple audits. But he did not indicate he planned to delay the issue in his committee. Conservative voices in Washington are being countered by reliably Republican business voices from home. Representative Tom Price, Republican of Georgia and a House conservative leader, said Monday that he was just starting to hear from both sides, including district retailers coming to his office.
Thanks to JONATHAN WEISMAN and the New York Times, and
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