US Internet sales tax backers push for late-session action

Supporters of the sales tax press on, despite opposition from House Speaker Boehner

Backers of an Internet sales tax aren't taking no for an answer, with supporters continuing to push the U.S. Congress to pass legislation this year.

Groups and lawmakers in favor of a widespread online sales tax have stepped up pressure for Congress to pass a bill allowing states to collect sales tax from online retailers not located within their borders, despite opposition from Representative John Boehner, speaker of the House of Representatives.

On Wednesday, supporters of an Internet sales tax hosted a rally in Washington, D.C., calling on the House to pass a bill approved by the Senate in May 2013. A spokesman for Boehner, an Ohio Republican, said last month that the speaker wouldn't allow the legislation to move forward in the House because of his long-standing opposition to new taxes.

But Boehner's opposition hasn't stopped groups like the National Retail Federation, the National League of Cities and the U.S. Conference of Mayors, which sponsored Wednesday's rally on Capitol Hill. Several local and state elected officials and U.S. lawmakers called on Congress to pass the Marketplace Fairness Act [MFA], the Senate bill that would allow for an Internet sales tax.

Under current law, states and local governments are not allowed to collect sales tax from Internet and catalog sellers located outside their borders. Supporters of an Internet sales tax say the current system is unfair to local bricks-and-mortar retailers that have to collect sales taxes of up to 10 percent. The lack of an online sales tax also costs state and local governments billions of dollars in tax revenue each year, supporters say.

The bipartisan vote for the bill in the Senate "shows that support for this issue exists on both sides of the aisle," Salt Lake City Mayor Ralph Becker said during the rally. "It is widely seen as a sensible solution that will put our Main Street retailers on a level playing field by eliminating an unfair tax break."

The Internet sales tax would not be a new tax because the 45 states that levy sales taxes require residents to report their Internet purchases and pay taxes on them, supporters of the tax argue. More than 90 percent of people ignore the requirement or don't know about it, and states have not enforced those rules.

Supporters of the Main Street Fairness Act didn't say how they expect to get around Boehner's opposition to the bill, other than public pressure.

Representative Steve Womack, an Arkansas Republican who spoke at the rally Wednesday, "believes legislation must be enacted to close the online sales tax loophole as soon as possible and remains hopeful it will be by year-end," a spokeswoman said later.

The legislation is a top priority for state, county and local governments, added Brian Namey, a spokesman for the National Association of Counties. "There are champions in the House and Senate who are working to make this happen," he said by email. "We can't just sit here and let the year come to an end after coming so far."

If Congress does not pass the legislation by the end of the year, supporters would have to start over with a new bill in 2015.

In addition to the rally in Washington, D.C., supporters are running television commercials calling on Congress to pass the sales tax bill.

"Every night in America, hundreds of small businesses close their doors forever" because of a lack of an Internet sales tax, one commercial says.

The online sales tax "loophole" will give Chinese e-commerce service Alibaba an unfair advantage over U.S. businesses, a second commercial says. "This Chinese company will decimate our local retailers," the commercial says. "Unless Congress ends special tax treatment for Alibaba and other online giants, Main Street will never look the same."

Opponents of the bill say a new sales tax would be difficult and costly for Internet sellers to comply with. Some opponents have objected to what they see as a new tax, despite current requirements for Internet shoppers to report their purchases.

Backers of an Internet sales tax "have spent a fortune" pushing for the sales tax bill, said Steve DelBianco, executive director of NetChoice, an e-commerce trade group. "They aren't surrendering until this Congress adjourns."

Backers of the bill are trying to tack it on to other important legislation, but congressional leaders have been stripping controversial items out of legislation during this end-of-the year session of Congress, DelBianco said. "Nobody believes that MFA could pass on its own," he said

Grant Gross covers technology and telecom policy in the U.S. government for The IDG News Service. Follow Grant on Twitter at GrantGross. Grant's email address is grant_gross@idg.com.

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Tags Steve DelBiancoNational Retail Federatione-commerceNetChoiceJohn BoehnerBrian NameyU.S. CongresslegislationinternetU.S. Conference of MayorsNational League of CitiesRalph BeckerNational Association of CountiesgovernmentSteve Womack

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