By Richard Rubin
WASHINGTON -- A new Republican proposal to resolve the
long-running fight over taxing internet sales across state lines
drew praise from Amazon.com Inc. and House Speaker Paul Ryan, but
other retailers and conservative groups remain wary.
Rep. Bob Goodlatte (R., Va.), Judiciary Committee chairman and
the draft bill's author, must persuade conservatives he isn't
pushing a tax increase or a sharp expansion of state power. And his
idea hasn't caught on yet with brick-and-mortar retailers, state
governments and lawmakers who spent years advancing their own
solution.
Trade groups representing retailers and shopping centers have
issued cautious statements, essentially thanking Mr. Goodlatte for
proposing something without endorsing his idea.
The Retail Industry Leaders Association, whose members include
Wal-Mart Stores Inc. and Best Buy Co. Inc., said it welcomed "an
open debate in the House aimed at ensuring that all retailers can
compete on a level playing field" but said it would "press for
changes that achieve true parity at the point of sale."
The growth of internet commerce has strained the framework the
Supreme Court affirmed in 1992, when it stopped states from
applying sales taxes on sellers that lack a physical presence in
the state. Internet retailers then achieved a price advantage by
shipping goods into states without opening physical outposts.
Retailers complained about losing business to online
competition. State legislators warned states were hemorrhaging
billions of dollars in revenue. A bipartisan coalition formed
around the idea of letting states tax those sales. Under their
plan, California could force a large Nevada company to collect
California sales taxes when it shipped a book into the state.
The Senate passed such legislation in 2013, but it has gone
nowhere in the House, where Mr. Goodlatte spent years on his own
alternative. This week, he released a new draft and a committee
aide said Mr. Goodlatte wants it to become law this year.
Mr. Goodlatte would upend the legal framework for sales taxes.
He would make states use the sales tax base of the retailer's state
and a single tax rate determined by the consumer's state. The
hypothetical transaction above, for example, would be taxed
according to Nevada's rules for books at California's rate.
"This bill would create a new kind of sales-and-use tax
structure, one never before implemented or even contemplated," said
Verenda Smith, deputy director of the Federation of Tax
Administrators, a group of state revenue officials.
Amazon, the largest online retailer, which now collects sales
taxes in most states, backed Mr. Goodlatte.
"We urge Congress to act now," Paul Misener, Amazon's vice
president for global innovation policy, said in a statement. "We
recognize that there are multiple ways to draft this legislation,
and, in addition to other bills, we also support Chairman
Goodlatte's new alternative approach."
The bill would limit the complexity inherent in different
states' sales tax bases and replace an unstable status quo with
something so simple that it doesn't require the small business
exemption in the Senate's bill, the Judiciary aide said.
"It would certainly be better than nothing, but it's not the
optimal solution," said Edward Zelinsky, a Yeshiva University law
professor who favors overturning the Supreme Court ruling and
implementing something like the Senate-passed bill.
The idea, the committee aide said, keeps auditing power in the
retailer's state, limiting conservatives' concerns about states
applying their laws outside their borders. That reach still would
be an issue, however, in five states without sales taxes --
Delaware, Montana, New Hampshire, Oregon and Alaska. Retailers
there would either apply the tax base of the state where they have
their largest receipts or report sales to their customers' states
to help those states enforce taxes their residents are supposed to
be paying but typically don't.
"I am shocked Republicans would propose an internet sales tax,"
said Sen. Ron Wyden (D., Ore.) "This proposal would create a
logistical nightmare for states like Oregon that don't have or want
sales taxes. I will continue to oppose any efforts to impose a
national sales tax scheme on Oregonians."
Many Democrats have backed the Senate bill, and they worry about
the potential fiscal impact on their home states. Nudging them off
the proposal they have supported for years would take some work by
Mr. Goodlatte, who must also placate anti-tax conservatives in his
own party. He also faces a short legislative calendar and the
difficulty of pursuing controversial policies during the lame-duck
period between the November election and the start of the new
Congress in January.
Michael Needham, the chief executive officer of Heritage Action
for America, said the small-government group would "carefully
review" Mr. Goodlatte's bill.
"That said," Mr. Needham continued in a statement, "the
Republican-controlled Congress would be wise to turn its attention
to creating opportunity for everyone, not doling out favors to
well-connected businesses and revenue-hungry state
governments."
Write to Richard Rubin at richard.rubin@wsj.com
(END) Dow Jones Newswires
August 26, 2016 16:30 ET (20:30 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
Best Buy (NYSE:BBY)
Historical Stock Chart
From Mar 2024 to Apr 2024
Best Buy (NYSE:BBY)
Historical Stock Chart
From Apr 2023 to Apr 2024