Conservative groups urge Congress to oppose online sales tax bill

A group of right-leaning organizations are urging members of Congress to reject bipartisan legislation that would require out-of-state online retailers to collect sales taxes.

The groups — including the National Taxpayers Union, Americans for Tax Reform and Heritage Action for America — are speaking out against a House bill called the Remote Transactions Parity Act, as well as similar measures.

“Congress should oppose this unwise legislation and instead work to preserve federalism, strengthen geographical limits to tax authority, and encourage tax competition,” the groups wrote.

The letter comes as the online sales tax issue has come back into the spotlight due to a case before the Supreme Court.

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The court ruled in 1992 that states can only require businesses to collect their sales taxes if the companies have a physical presence in the state. But it will revisit that past decision in a case set for oral arguments in April.

The bill was introduced last year by Rep. Kristi Noem (R-S.D.) and has the support of a bipartisan group of 50 co-sponsors. Some supporters of the legislation would like to see it taken up before the Supreme Court rules.

Supporters of the legislation say the measure is important in order to provide a level playing field for brick-and-mortar retailers and to allow states to collect sales taxes that are owed to them.

But the conservative groups argue that it’s misleading to say that state budgets are being harmed by the “physical presence” standard set forth in the 1992 Supreme Court ruling. The group said that most money spent on retail is still spent at brick-and-mortar businesses, and sales taxes are already collected on many online purchases by large retailers such as Amazon and Walmart.

“Dismantling the physical presence protection for remote retail sales could throw open the floodgates for states to aggressively attempt enforcement of not just their sales tax laws, but also business and individual income tax rules, and even activist regulatory obligations on out-of-state entities,” the groups wrote.