7 Principles to Guide an Online Sales Tax

House Judiciary Committee releases 7 principles to guide online sales tax discussion.

House Judiciary Committee releases 7 principles to guide online sales tax discussion.

Update, 10.10.13: Chairman Goodlatte is reportedly examining the Marketplace Fairness Act’s small-seller exemption and its single-audit requirement. The chairman is said to be delving into how remote seller audits are handled, specifically joint-audits by multiple states. One approach under consideration is the coordination of a single audit, or permitting a remote seller to choose a multistate joint audit. (LexisNexis Legal Newsroom).

The Marketplace Fairness Act of 2013 (MFA) has been gathering dust in the House since last May. At last, it looks like the issue will be addressed. Representative Bob Goodlatte (R-Virginia), Chairman of the House Judiciary Committee, today released seven “Basic Principles on Remote Sales Tax” with which to frame the discussion of MFA.

Since the bill was passed by the Senate, Chairman Goodlatte has expressed concerns that MFA is not “sufficiently simplified.” Today, he called the basic principles on remote sales tax “a starting point for discussion in the House of Representatives.” In introducing the principles, he said he is looking forward to “hearing fresh approaches to this issue… .”

Representative Spencer Bachus (R-Alabama), Charmian of the Subcommittee on Regulatory Reform, Commercial and Antitrust Law, said the principles “provide a thoughtful framework for discussion on the Internet sales tax issue.”

The Seven Basic Principles on Remote Sales Tax

1. Tax Relief: Using the Internet should not create new or discriminatory taxes not faced in the offline world. Nor should any fresh precedent be created for other areas of interstate taxation by States.

2. Tech Neutrality: Brick & Mortar, Exclusively Online, and Brick & Click businesses should all be on equal footing. The sales tax compliance burden on online Internet sellers should not be less, but neither should it be greater than that on similarly situated offline businesses.

3. No Regulation Without Representation: Those who would bear state taxation, regulation and compliance burdens should have direct recourse to protest unfair, unwise or discriminatory rates and enforcement.

4. Simplicity: Governments should not stifle businesses by shifting onerous compliance requirements onto them; laws should be so simple and compliance so inexpensive and reliable as to render a small business exemption unnecessary.

5. Tax Competition: Governments should be encouraged to compete with one another to keep tax rates low and American businesses should not be disadvantaged vis-a-vis their foreign competitors.

6. States’ Rights: States should be sovereign within their physical boundaries. In addition, the federal government should not mandate that States impose any sales tax compliance burdens.

7. Privacy Rights: Sensitive customer data must be protected.

Overall, reaction to the principles has sounded positive.

Brian Bieron of eBay, which has fought the creation of an online sales tax, said the company “is very encouraged that the remote sales tax principles released today by Chairman Goodlatte address concerns that we have raised on behalf of our small business community.” And both the National Governors Association (NGA) and the National Retail Federation (NRF), which have been solid supporters of the Marketplace Fairness Act since it was first introduced, issued statements commending the principles.

The National Governors Association applauded “Chairman Goodlatte for his focus on this issue and for making it a priority of the committee.” Yet in the same release, NGA makes it clear that “Marketplace Fairness is common-sense legislation that upholds the principles of federalism and levels the playing field between Main Street and e-street. … We look forward to working with the committee to ensure this legislation moves through Congress this year.”

The National Retail Federation issued a release welcoming the principles while underscoring its support for MFA. The principles are, it said, “a legislative roadmap for advancing sales tax fairness legislation in the House of Representatives….” NRF also released a short video featuring small business owners speaking of the need for online sales tax.

While the principles do signal a willingness to at last address the issue of remote sales tax, they also suggest that the road to law will be bumpy. Will states be willing to simplify sales tax laws so much that a small seller exemption would be unnecessary? How will state governments respond to the suggestion to “keep tax rates low?” Will House lawmakers consider an Internet sales tax “new or discriminatory?”

We’ll just have to wait and see.

No matter what happens with the Marketplace Fairness Act, an automated sales tax solution will make your life simpler.

 

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