Business groups want House committee to consider online sales tax legislation

More than two dozen business groups are calling for the House Judiciary Committee to vote on legislation that would allow states to collect existing sales taxes on their residents’ purchases from out-of-state online retailers.

“America’s merchant community urgently needs Congress to resolve this serious issue that continues to disadvantage many small businesses and the communities they serve across the country,” the groups wrote in a letter sent to Judiciary Committee Chairman Bob Goodlatte (R-Va.) on Tuesday.

Groups that signed the letter included the American Supply Association, National Retail Federation and the U.S. Chamber of Commerce.

The letter comes after Senate Majority Leader Mitch McConnell (R-Ky.) promised a vote on online sales tax legislation in the chamber this year. He made that promise in order to get the Senate to pass a customs-enforcement package that included a permanent extension of the ban on taxing consumer Internet access.

The Senate easily passed online sales tax legislation called the Marketplace Fairness Act (MFA) in 2013. A version of the MFA was reintroduced last year, and most of the lawmakers who voted for the 2013 bill remain in office. But passage of online sales tax legislation is less certain in the House.

The business groups want the House Judiciary Committee to consider the two major approaches to the online sales tax issue that are being discussed. One approach, taken by the MFA and legislation introduced by Rep. Jason Chaffetz (R-Utah), would tax online purchases at the rate of the customer’s state. The other approach, taken by a proposal from Goodlatte, would tax online purchases at the rate of the retailer’s state.

“We stand ready to be a constructive participant in this process,” the groups wrote.

Because Congress has not enacted online sales tax legislation, states have been considering or enacting their own approaches to collecting sales taxes on online purchases. The stakeholder groups said they do not think that it is ideal for the issue to be dealt with on a state-by-state basis.

“The business community is highly concerned that these state efforts could lead to the issue being decided by the courts,” the groups wrote. “Further, this state-by-state approach prevents businesses from benefiting from simplification measures such as uniform definitions or free tax software that could be achieved by federal legislation.”

One state that has taken action is Colorado. The state’s law, which was recently upheld by a federal appeals court, requires online retailers to report information to both consumers and state agencies in cases of purchases over $500.

“Not only does this law create an unnecessary administrative burden for remote sellers, but it also opens the door to serious privacy concerns for consumers,” the groups wrote.

The Marketplace Fairness Coalition, whose membership includes some of the groups that signed the letter, expressed support for the groups’ call to action.

“The longer Congress waits, the more harm it does to local job creators and states that are faced with having to cut services or raise alternate taxes to make up for lost online sales tax revenue,” the coalition said.