House Would Back Online Sales Tax Bill If Committee Releases It

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By J ennifer McLoughlin

House Minority Whip Steny H. Hoyer (D-Md.) called out the Judiciary Committee as the barrier to long-pending legislation that would expand states’ abilities to collect tax on web-based sales.

Hoyer told reporters during a Feb. 28 pen-and-pad briefing that the House Judiciary Committee should release a marketplace fairness bill that “levels the playing field and the competition.”

“If it would be reported out of the Judiciary Committee, it would pass on the floor of the House,” said Hoyer, who noted his support for e-fairness legislation. “This is another example where a bill that has the majority support, in my opinion, of the 435 members of Congress—the only reason for not passing the House is that the committee will not report it.”

Several competing proposals have surfaced, but stalled, in Congress through the years. Both the Marketplace Fairness Act (MFA) and the Remote Transactions Parity Act (RTPA), which authorize states to mandate remote sales tax collection under certain conditions, haven’t reached the House for a vote.

Proposals at Play

States’ taxing authority over remote retailers is restrained under Quill Corp. v. North Dakota, 504 U.S. 298 (1992), a U.S. Supreme Court decision that forbids states from imposing sales and use tax collection obligations on sellers lacking a physical presence in-state. A wave of states, led by Alabama and South Dakota, have launched direct attacks on Quill as they have enacted increasing numbers of new online sales tax regimes.

The MFA and the RTPA would supersede the Quill standard, setting the tax base and rate according to the consumer’s location. Other related congressional proposals are:

  •  the No Regulation Without Representation Act, which maintains the status quo by codifying the physical presence rule in Quill, and
  •  although not formally introduced, the Online Sales Simplification Act (OSSA), which authorizes collection, but bases the taxation of remote purchases on the seller’s location and the tax rate of the consumer’s location.

The MFA was the first stab at a national standard for state sales taxation, passing the Senate in 2013 on a 69-27 vote. However, the measure didn’t advance to a House vote—and has since struggled against divisions that don’t follow partisan lines. Similar in structure but with some differences, the RTPA likewise has met with resistance in its efforts to reach a House vote.

Lawmakers Seeking Solution

Sources have told Bloomberg BNA that House Speaker Paul D. Ryan’s (R-Wis.) office has met with staffers for key sponsors of the proposed remote sales tax measures to push for a resolution in 2017. Lawmakers have indicated they are working toward that end—including Rep. Steve Womack (R-Ark.), House sponsor of the 2013 MFA.

“Rep. Womack wholeheartedly agrees with Rep. Hoyer that e-fairness legislation has languished far too long in the Judiciary Committee,” Claire Burghoff, communications director for Womack, told Bloomberg BNA in an e-mail. “However, he’s encouraged by conversations he’s had with House and committee leadership and their recognition that an e-fairness solution must be considered by the whole House and Senate as soon as possible.”

During a Feb. 27 media briefing with the National Governors Association, Sen. Lamar Alexander (R-Tenn.) said that senators have agreed “in a large bipartisan way that we ought to get Washington out of the business of telling you how to collect your state sales taxes, how do you collect them from out of state or in state.”

Holding Pattern in House

Several practitioners have singled out Rep. Robert W. Goodlatte (R-Va.), sponsor of OSSA and chair of the Judiciary Committee, as the primary hurdle in the House.

Stephen P. Kranz, a Washington-based partner with McDermott Will & Emery, said in October that Goodlatte’s world view is grounded in the principle of “no regulation without representation.” Originally frustrated with California’s chicken cage law, which sets cage dimensions for any farmer selling eggs into the state, Goodlatte’s dislike for cross-border regulation has bled into the tax discussion.

Goodlatte and Hoyer didn’t immediately respond to requests for additional comment. Rep. Jason Chaffetz (R-Utah), who sponsors the RTPA, declined to comment. He told Bloomberg BNA in January that he wants the issue “to be addressed sooner rather than later.”

As an “eternal optimist,” Chaffetz said a solution could surface this session. “As you talk to governors, state legislators and, increasingly, the online retailers, they need relief,” he said. “And they need it soon. The system is not fair. It’s not balanced. And the lawsuits are flying everywhere across the country.”

With assistance from Jonathan Nicholson in Washington.

To contact the reporter on this story: Jennifer McLoughlin in Washington at jmcloughlin@bna.com

To contact the editor responsible for this story: Ryan C. Tuck at rtuck@bna.com

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