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Passage Of US Internet Sales Tax Looks Unlikely

by Mike Godfrey,, Washington

14 November 2014

Any thoughts that the current "lame duck" session in the United States Congress would pass the Marketplace Fairness Act (MFA), which would allow states to impose sales taxes on internet purchases supplied by online retailers outside their borders, appear to have been squashed by comments from House of Representatives Speaker John Boehner (R – Ohio).

Currently retailers are only required to collect sales tax in US states where they also have bricks-and-mortar stores, but the MFA would give states the option to require online retailers with national annual sales greater than USD1m to collect the tax, even if the websites lack a physical presence in the state.

A version of the MFA was approved by the Democrat-led Senate in May last year and sent for approval to the Republican-led House, where it has encountered a great deal of opposition, particularly on the grounds that it is considered to create new taxation and onerous compliance requirements.

The Bill has remained in the House Judiciary Committee, where its Chairman, Bob Goodlatte (R – Virginia), issued a set of basic principles in September 2013 to guide discussions on the future of the proposed legislation. However, little progress has been seen, and if the MFA is not passed this year it will need to start over again in the next Congress from January 2015.

A letter to Goodlatte on November 10, 2014, signed by a very wide collection of businesses and trade associations of the Marketplace Fairness Coalition (MFC), which supports the Bill, urged him "to ensure fairness in today's retail marketplace, and... move forward with legislation that will level the playing field for all retailers."

"As small-business owners," it continued, "we embrace competition and the challenge of attracting customers in the digital age, but we ask that Congress end the tax advantage currently afforded our online competitors" by passing the MFA.

However, in a statement on the same day, Boehner's spokesman noted that "the Speaker has made clear in the past he has significant concerns about the Bill, and it won't move forward this year."

He said that "the House and Senate should work together to extend the moratorium on internet taxation," which some Democrats in the Senate have been looking at attaching to the MFA in joint legislation.

Americans for Tax Reform (ATR) welcomed Boehner's stand against the Bill, and its President Grover Norquist warned that "too many politicians in state capitals and Washington have looked at the internet only as a way to raise taxes. They want to tax internet access; they want to tax internet sales. Boehner has drawn a line in the sand saying the American people come first and politicians need to keep their hands off the internet."

However, the MFC sent a further letter on November 12, this time to Boehner himself, asking him to reconsider and allow a vote on the MFA in the House. It stressed that "locally based retailers and wholesaler-distributors and their employees across the country expect Congress to make 2014 the last year in which Main Street businesses are burdened with a Government-sanctioned price disadvantage, compared to their online competitors."

TAGS: compliance | tax | business | sales tax | tax compliance | commerce | law | employees | internet | e-commerce | legislation | United States | retail | Tax

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