Goodlatte Online Sales Tax Bill Introduction Seen Aimed at Influencing Debate This Congress
House Judiciary Committee Chairman Bob Goodlatte, R-Va., released a long-awaited draft online sales tax bill Thursday aimed at bridging the gap between supporters and opponents of existing bills like the Marketplace Fairness Act (S-698) and the Remote Transactions Parity Act (HR-2775). The Online Sales Simplification Act, as expected (see 1606030050), would address online sales taxes via an “origin sourcing” framework. Introduction before the end of the August recess appears designed to influence debate on online sales taxes during the remainder of the 114th Congress, industry lobbyists said.
Sign up for a free preview to unlock the rest of this article
Timely, relevant coverage of court proceedings and agency rulings involving tariffs, classification, valuation, origin and antidumping and countervailing duties. Each day, Trade Law Daily subscribers receive a daily headline email, in-depth PDF edition and access to all relevant documents via our trade law source document library and website.
The draft OSSA's origin sourcing framework would require online retailers to pay sales taxes based on the rules in their home state and the tax rate of the state where the purchaser resides. The online retailer would pay the tax rate in its own state if the state in which the purchaser resides doesn't participate in the State Tax Clearinghouse. OSSA would allow a state government to audit a seller's payments of sales taxes on online purchases only if the state is the seller's home state; it also would prevent double taxation of online sales.
Introduction before Congress' Sept. 6 return likely undercuts potential efforts by supporters of HR-2775 and S-698 to attach the controversial bills to must-pass legislation such as possible continuing resolutions aimed at buying additional time to negotiate the FY 2017 federal budget before FY 2016's Sept. 30 end-date or other must-pass bills that may come up during the lame-duck session, lobbyists told us. S-698 supporters have attempted to attach previous iterations of that bill to must-pass legislation in previous lame ducks. Their favorite “hostage” bill -- the Internet Tax Freedom Act (ITFA) -- was “freed” earlier this year, said NetChoice Executive Director Steve DelBianco. The Trade Facilitation and Trade Enforcement Act, enacted in February, included language from the Permanent Internet Tax Freedom Act that makes ITFA permanent (see 1602110056).
It's “going to be so much better to have [OSSA] front and center” as a workable online sales tax compromise going into the fall, particularly because of Senate Majority Leader Mitch McConnell's, R-Ky., promise to allow Senate consideration of S-698 as part of a deal to prevent a floor fight on the Trade Facilitation and Trade Enforcement Act (see 1602100061), DelBianco said. Introduction now likely “changes the calculus” in the push for the Senate to fulfill McConnell's promise on S-698 consideration, said R Street Institute Executive Director Andrew Moylan. “Introduction of [OSSA] signals that [HR-2775 and S-698] are dead on arrival on the House side” at this point in the legislative calendar, Moylan said. “There's an element of gamesmanship between the House and Senate chambers and I wouldn't put it past supporters” of S-698 to push even harder for the Senate to take up the bill before the end of the 114th Congress, he said.
House Judiciary is “awaiting feedback from the relevant stakeholders before we announce any further steps” on OSSA, an aide told us. Goodlatte's introduction of the draft OSSA text doesn't appear to be “just a messaging piece” despite the rapidly closing legislative window, Moylan told us. “My sense is that [Goodlatte] intends this to be a live effort” aimed at passing a final version of the bill this year, Moylan said: Goodlatte's staffers have “been very thoughtful about it” over the course of their work on the bill and “they appear to fully intend this to be something that they actually make something of.” Many factors could still scuttle progress on OSSA this year but Goodlatte's timing “is appropriate to put this at the front of the line” this year, DelBianco said.
Moylan will be closely following the reactions of existing supporters and opponents of S-698 to the draft OSSA text in the coming weeks. The language doesn't contain “everything [S-698's supporters] wanted” in a compromise but “it's hard to argue that it doesn't address some of their concerns and does it in a way that's dramatically preferable” to HR-2775 or S-698, Moylan said. It will also be important to gauge S-698 opponents' opinions on the OSSA draft's language, which is something R Street itself is “still trying to figure out,” he said: Both sides' opinions “will indicate whether or not [OSSA] is something upon which there can be a consensus. In the absence of a consensus, we're back where we were before” Goodlatte introduced it.
The National Retail Federation, which supports S-698, hopes Goodlatte's introduction of the OSSA draft “will bring the attention needed to get Congress to move forward in treating purchases made online the same as those made in local stores when it comes to sales tax collection,” said Senior Vice President-Government Relations David French in a statement. "We look forward to working constructively with [Goodlatte] and Congress to ensure legislation is passed to achieve the level playing field for sales tax collection that is so desperately needed."