Federal Internet Sales Tax Bill Still Alive Despite Press Reports to Contrary

Federal Internet Sales Tax Bill Still Alive Despite Press Reports to Contrary
June 7, 2013

A federal bill that would allow states to compel online and catalog retailers to collect sales tax on all sales, regardless of where shoppers are located, has not been blocked after all.

Earlier this week the Roanoke, Virginia affiliate of NBC reported U.S. House Judiciary Chairman Bob Goodlatte (R-VA) said his committee will not pass the Marketplace Fairness Act. Nearly one month ago the U.S. Senate passed the bill by a 69-27 margin.

Goodlatte followed up that NBC affiliate report with a statement indicating that though he has serious reservations about the bill, "I am open to considering legislation concerning this topic and the House is working on alternatives to the bill passed by the Senate. To be clear, if any action is taken, Congress must be involved in the process and the House Judiciary Committee is looking at alternatives that could enable states to collect sales tax revenues without opening the door to aggressive state action against out-of-state companies."

Proponents of the Marketplace Fairness Act argue it is needed to restore a balance between online and traditional “bricks-and-mortar” retailers. However, the act requires online retailers to collect sales tax from each consumer, based on where the consumer is located. Traditional retailers collect tax based on where their stores are located, not on where their shoppers come from.

Matthew Glans, senior policy analyst at The Heartland Institute, believes states should not be able to tax residents of other states because they have no political voice in the taxing state.

“The nexus standard that disallows state governments from forcing a tax on a company without the company having a physical presence in the state is an important taxpayer protection that has been repeatedly upheld in the U.S. Supreme Court,” he said. “This standard protects us from an abuse that Americans have fought against since our nation’s inception: taxation without representation.”

Logan Pike (logan.heartland@gmai.com) is a government relations intern at The Heartland Institute.