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Online Sales Tax Bill Faces Tough Test in House

15 May, 2013 By: Doug McPherson

WASHINGTON – The online sales tax bill (The Marketplace Fairness Act) that sailed relatively easily through the U.S. Senate is facing tougher scrutiny in the House of Representatives, analysts say.

The act, which passed the Senate 69-27, would authorize states to tax merchants from anywhere in the country that sell and ship to their residents, be it through phone, catalog or online orders.

And tax-averse Republicans are already mounting fierce opposition.

House Speaker John Boehner (R-OH) said last week it’s unlikely he’ll support the legislation because he believes it places too heavy of a burden on online merchants by requiring them to begin calculating and charging varying sales tax rates depending on where they are shipping their products.

Boehner told Bloomberg Television, “Where you’ve got 50 different sales-tax codes, it’s a mess out there … you’re going to make it much more difficult for online retailers to be able to comply.”

Right now, states can only require sellers to collect sales tax if they have a physical presence inside their borders. A growing number of House Republicans, many of whom view the proposal as a new tax on businesses, are siding with Boehner.

Proponents say states already have the authority to collect online sales tax, but the burden is on shoppers, not sellers. That model has proven too complicated, they say, and most customers do not even know they are supposed to file taxes on those purchases – so, many don’t.

The result is an advantage for online sellers, who can often charge lower prices than brick-and-mortar retailers because they are rarely forced to account for sales tax. It also prevents states from collecting roughly $11 billion in sales taxes every year, and that number continues to grow as more consumers shop online.

“There’s a lot of political difficulty getting through the fog of it looking like a tax increase,” Rep. Steve Womack (R-AR), the bill’s sponsor in the House, told the Associated Press. And, though he did not reject the bill, House Judiciary Committee Chairman Bob Goodlatte (R-VA) said the measure still needs a lot of work.

“This proposal is known as the Marketplace Fairness Act, but it is anything but fair,” Sen. Ron Wyden (D-Ore.) said on the floor of the Senate, later arguing that the legislation is “unprecedented in its reach to discriminate against the Internet, employers and states with modest or no sales taxes. It is, in my view, a recipe for economic stagnation.”

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