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Governors Pressure Boehner to Tax Online Sales

As another Marketplace Fairness Act hits the U.S. Senate, supporters are urging the House speaker -- one of the idea's biggest roadblocks -- to do whatever necessary to pass it through Congress.

U.S. Speaker of the House John Boehner
U.S. Speaker of the House John Boehner
MCT/Olivier Douliery
As a proposal allowing states to collect taxes on Internet sales hit the U.S. Senate for a third session in a row Tuesday, supporters are already turning their efforts to the other chamber -- where the idea has historically flamed out.

In a pointed letter to the House Speaker John Boehner, the National Governors Association (NGA) urged the Ohio Republican to push the so-called e-fairness legislation forward while noting the pitfalls of a competing bill floated by House Judiciary Chairman Bob Goodlatte earlier this year. The House Judiciary Committee is where last session’s bill, termed the Marketplace Fairness Act (MFA), died after passing the Senate early in 2013. Dan Crippen, the NGA’s executive director, noted that Boehner could sidestep the unwilling committee, if he so chose.

“As you know, Mr. Speaker, the rules of the House and Senate provide a way to move forward when committees fail to act,” Crippen wrote. “For example, in the Senate it was necessary to move MFA directly to the floor without committee action. The bill was debated over several days and ultimately passed by a vote of 69-27; the committee’s failure to act clearly thwarted the will of the Senate.”

The proposal to allow states to collect taxes on Internet sales has been a top priority for governmental organizations like the NGA and is widely supported by brick-and-mortar retailers who say they are unfairly losing business to online competitors that aren't subject to a sales tax. Versions of the Marketplace Fairness Act have been proposed in 2011 and 2013. The farthest the bill has progressed was passing the Senate in 2013.

This year’s legislation, the Marketplace Fairness Act of 2015, was introduced Tuesday by Senators Mike Enzi (R-Wyo.), Dick Durbin (D-Ill.), Lamar Alexander (R-Tenn.) and Heidi Heitkamp (D-N.D.). Betsy Laird, senior vice president of Global Public Policy at the International Council of Shopping Centers, appealed to the more conservative-leaning House by calling the tax-free status of many online retailers a “de facto government subsidy.” Meanwhile, she added, stores are forced to deal with higher property taxes.

“The Senate has shown that it is ready and willing to level the playing field for all retailers,” Laird said. “It is now up to the House to act.”

Assuming it passes the Senate again, this year’s e-fairness bill could meet competition in the House. Rep. Goodlatte’s proposal would tax Internet purchases using the sales tax rate in the home state of the seller. (The Senate bill taxes purchases based on the rate where the consumer lives.) In his letter to Boehner, Crippen noted that if one of Goodlatte's constituents in Virginia buys something online from a California company, he would pay the higher California sales tax. “Not only would the buyer pay taxes in a state in which he did not receive services and cannot vote (truly taxation without representation), he would see his tax bill go up,” Crippen said. “And because the higher tax rate would dissuade consumers from purchasing from California companies, those companies would have a strong incentive to move to lower or no sales tax states, an incentive created by federal law.”

Boehner has so far been unsympathetic to Marketplace Fairness Act supporters. He was largely behind the 2013 bill’s death-by-committee and the concept has been opposed by some like-minded conservative and anti-tax groups, including Americans for Tax Reform and its president, Grover Norquist.

Liz Farmer, a former Governing staff writer covering fiscal policy, helps lead the Pew Charitable Trusts’ state fiscal health project’s Fiscal 50 online resource.
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