Republicans Search for Path to U.S. Online Sales Tax Bill

U.S. House Republicans are seeking a way to address the ability of Internet retailers and catalog companies to avoid collecting state sales taxes, a situation brick-and-mortar stores say is unfair to them.

House Judiciary Committee Chairman Bob Goodlatte said he wants to start “winnowing” proposals to see what Congress might be able to enact. He declared himself sympathetic to traditional retailers; he hasn’t settled on a plan.

“The strengths and weaknesses of each proposal were debated thoroughly,” Goodlatte, a Virginia Republican, said in a statement after a hearing in Washington today that lasted more than three hours. “There was much to take in and we will now continue to further examine these and any other proposals that are submitted through a collaborative process.”

The Senate has passed legislation to have states require that out-of-state Internet retailers and catalog companies collect sales taxes. The measure passed May 7 in a 69-27 bipartisan vote.

Addressing the issue is a priority for retailers such as Wal-Mart Stores Inc., along with state officials who say they lose as much as $23 billion in revenue a year when consumers buy goods from out-of-state sellers and don’t pay sales taxes. Inc., the largest Internet-based retailer, supported the Senate bill. It is expanding into more states to speed delivery, which means it will collect taxes anyway.

EBay Opposes

EBay Inc. and anti-tax groups oppose the Senate bill, as do representatives from states without sales taxes.

Goodlatte has rejected the Senate measure, maintaining that it’s too complex and that retailers would face audits from states where they have no representation. He released principles for a bill last year, though he hasn’t set a timetable for writing or considering legislation.

The Judiciary Committee is discussing several options, including proposals that would tax purchases based on the location of the seller, not the buyer.

That approach would limit the number of potential audits that online retailers could face. At the same time, it might encourage companies to move -- either on paper or for real -- to states without sales taxes.

Republicans are divided. Some, including Representative Blake Farenthold of Texas, said they worried that giving states new authority to enforce existing laws would increase the burden for taxpayers.

“It sure smells like a new tax to those of us who pay it,” he said.

Software Issue

Others, including Representative Jason Chaffetz of Utah, said they thought the details about compliance costs and software integration could be worked out.

“The states are clamoring for it,” he said.

Representative John Conyers of Michigan, the committee’s top Democrat, said he would prefer to start amending and voting on the Senate bill.

“I welcome the opportunity to hear workable alternative proposals,” he said. “This issue is a prime opportunity for all of us to work on a bipartisan basis.”

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