Marketplace Fairness Act Unlikely to Proceed After Goodlatte Releases Online Sales Tax Principles

Goodlatte’s principles were designed to ensure that any House legislation on the subject is simple and doesn’t create a new tax burden for consumers. Goodlatte said in May he would be “more thoughtful” about online sales tax legislation, after the Senate passed the Marketplace Fairness Act following a contentious debate (WID May 8 p1). The MFA would let a state collect sales tax when its residents make an online purchase, regardless of the retailer’s location. Goodlatte did not say when or if he would craft his own legislation, in statements Wednesday or in briefings with stakeholders on the principles Tuesday, several told us.

Goodlatte’s seven principles state that using the Internet shouldn’t create new or discriminatory taxes, or any “fresh precedent” for other areas of interstate taxation by states. The list said brick-and-mortar businesses and online retailers must be on “equal footing.” Those subject to the taxation should have direct recourse, the list said, and any law should encourage tax competition both in the country and with foreign competitors. States should maintain sovereignty, it said, and any data collected should be kept private.

Goodlatte’s list would also require that any legislation be “simple enough to ensure that an exemption for small businesses isn’t necessary,” it said. Debate over the MFA in the Senate centered around an exemption, included in the Senate bill, for out-of-state sales taxes for businesses with less than $1 million in revenue. EBay, which opposed the MFA in the Senate, wants to expand that exemption to $10 million or 50 employees, Senior Director-Global Public Policy Brian Bieron told us in May.

MFA opponents told us Goodlatte’s principles weren’t reconcilable with the Senate-passed bill. “MFA advocates may think they can tweak their bill to arrive at the Judiciary principles, but the message they should take from the Chairman is clear: you can’t get there from here,” said Steve DelBianco, NetChoice executive director, in a statement. Andrew Moylan, senior fellow at the R Street Institute, told us “an honest analysis” of the principles would note that the MFA doesn’t really fit with their substance. He said Goodlatte requested provisions that ensured states weren’t given tax authority outside their own borders, and said such provisions were incompatible with the MFA’s basic framework. “These principles, which are on the whole pretty good, make it clear the MFA doesn’t meet any tests,” he said. The principles will send the House “back to square one” on the Internet sales tax question, he said, saying it’s too early for legislation but he expects a hearing sometime in the coming months. “We need a comprehensive hearing to do the vetting that the Senate refused to do” in its rush to pass a bill, he said.

EBay is “very encouraged" Goodlatte’s principles “address concerns that we have raised on behalf of our small business community,” it said in a statement. It called them a “sensible starting place” for developing legislation that considers the interests of many stakeholders.

MFA supporters have said the legislation would help cash-strapped states and preserve Main Street jobs (WID June 20 p10). A spokesman for the Retail Industry Leaders Association told us Goodlatte’s principles would require supporters to make a few changes to the MFA, but the “most important part of the principles was the acknowledgement that the current system is broken.” The bill has overall support in the Senate, and now the process is moving forward in the House, he said, all of which “bodes well” for those engaged in fixing discrepancies in the tax system. RILA will continue pushing for legislation, he said. “Movement in the House coupled with the overwhelming bipartisan vote in the Senate earlier this year means the online tax loophole’s days are numbered,” RILA said in a statement.

The National Governors Association, which supported the Senate bill, also applauded Goodlatte for his focus and said it hopes to see legislation move through Congress this year (http://bit.ly/19e0uW6). The Marketplace Fairness Coalition, another MFA supporter, said “it’s clear that Chairman Goodlatte is committed, as are many in Congress, to finally addressing this critical issue and leveling the playing field for all American businesses,” and called the principles a “great first step.” It said it hopes the Judiciary Committee will move quickly toward legislative text. The National Retail Federation said the principles would act as a “legislative roadmap” for advancing sales tax fairness legislation, and showed that Congress is listening to retailers. “NRF looks forward to analyzing and discussing these principles with our members, and remains confident that Congress will address the unlevel playing this legislative session,” it said.

"The aim of the principles is to provide a starting point for discussion in the House,” Goodlatte said in a statement Wednesday. “I greatly look forward to hearing fresh approaches to this issue and continuing the discussion.” Judiciary Subcommittee on Regulatory Reform, Commercial and Antitrust Law Chairman Spencer Bachus, R-Ala., said the principles provided a “thoughtful framework for discussion” on the Internet sales tax issue.

"Goodlatte’s principles are a huge step” toward fixing this “injustice,” said Rep. Steve Womack, R-Ark., in a statement. Womack introduced the companion to the MFA in the House. Goodlatte’s “principles reflect the spirit of the Marketplace Fairness Act, and I am extremely supportive of and encouraged by them,” said Womack.