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US: Internet sales tax faces Republican opposition

12 November 2014   (0 Comments)
Posted by: Authors: John D. Mckinnon and Kristina Peterson
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Authors: John D. Mckinnon and Kristina Peterson (The Wall Street Journal)

House Republicans Worry About Voter Perception of Bill to End Tax-Free Online Shopping

Brick-and-mortar retailers who had hoped Congress would pass a bill to effectively end tax-free online shopping are likely to be disappointed.

House Speaker John Boehner (R., Ohio) indicated this week that he would block the measure, which would give states the ability to compel many online retailers to collect sales tax for them.

The Senate passed the bill—known as the Marketplace Fairness Act—more than a year ago with broad bipartisan support. Supporters view the measure as a matter of fairness to storefront retailers that have to collect the tax. Retailers argue that online merchants gain a significant competitive advantage from tax-free Internet sales.

House Republicans, though, have never warmed to the bill, worrying that voters could view it as an indirect tax increase.

In response, Senate sponsors hoped to force the measure’s passage by combining it with another measure that is widely popular—an extension of the 15-year-old moratorium on state taxes on Internet access, known as the Internet Tax Freedom Act, which expires on Dec. 11.

But this week, Mr. Boehner let it be known that he opposes that maneuver, significantly weakening the bill’s chances.

"The speaker has made clear in the past he has significant concerns about the bill, and it won’t move forward this year,” Kevin Smith, a spokesman for Mr. Boehner, said in a written statement. He added that while lawmakers continue to study the online sales tax problem, "the House and Senate should work together to extend the moratorium on Internet [access] taxation without further delay.”

The comment appeared to boost the odds that Congress eventually would adopt an extension of the access-tax ban only, without adding the online-sales-tax measure.

Supporters of the online sales tax measure were disappointed, but aren’t giving up hope.

"The comments were frustrating for those of us in the business community that have been working in good faith with House leadership,” said Jason Brewer, a vice president of the Retail Industry Leaders Association, a coalition of big-box stores. "Regardless, it doesn’t change the Senate dynamics, where a clear bipartisan majority wants [the two issues] solved together.”

Stephen Schatz, a spokesman for the National Retail Federation, said the group is "pulling out all the stops in the form of advertising, grass roots engagement and communications” to push Congress to approve it.

Online retailers applauded Mr. Boehner’s approach.

"We’re pleased to see that Speaker Boehner understands the threat that the misnamed Marketplace Fairness Act poses to small e-retailers,” said Phil Bond, executive director of WE R HERE, a coalition of small online retailers, who added that the group is encouraging Congress to renew the access-tax moratorium.

The Senate is expected to begin debate as early as this week on the Internet tax issues as Congress cranks up a potentially volatile lame-duck session.

Supporters of the online tax measure are led by Majority Whip Richard Durbin (D., Ill.), who is keeping all options open, including combining the two measures, a spokeswoman said. He will keep working with other supporters "to find a path forward this year,” she added.

Two Republican supporters— Mike Enzi of Wyoming and Lamar Alexander of Tennessee—are still hoping the online sales tax measure will pass this year.

"Sen. Alexander remains optimistic that Congress can pass the Marketplace Fairness Act this year,” said a spokesman. "Last year, 69 senators voted for what Sen. Alexander believes should be a simple matter of a state’s right to collect or not collect taxes already owed.”

No matter what happens on the Internet tax measures, the congressional process that unfolds this week on the issue likely will be messy, even by the standards of the dysfunctional 113th Congress.

The current Senate majority leader, Harry Reid (D., Nev.), plans to let lawmakers try to reach an agreement on a limited number of amendment votes on the Internet tax measures, a Democratic aide said. Republicans have criticized Mr. Reid for not allowing enough amendment votes and effectively locking down the minority.

But opening up the process now could unleash a blizzard of pent-up requests.

That, in turn, could shift the burden to Republicans to show that they can contain their members’ appetite for politically charged amendment votes. The debate could provide an early test for Sen. Mitch McConnell (R., Ky.), who is expected to become the new majority leader in January, and who hopes to show voters that Republicans can govern effectively while also running the Senate in a more open fashion.

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