WASHINGTON - State and local government groups are urging the House to pass online sales tax legislation, called the Marketplace Fairness Act, after a spokesman for House Speaker John Boehner said the Ohio Republican has concerns about the bill and no intention of moving it forward this year.
The National Governors Association, National League of Cities, and the other "big seven" state and local groups, sent a letter to House and Senate leaders Tuesday urging them to combine the MFA with a temporary extension of the moratorium on taxing Internet access. The groups told the leaders they are "gravely disappointed" by reports that Congress is willing to vote on a permanent extension of the Internet Tax Freedom Act, which suspends taxes on Internet access service, without even considering the MFA.
The MFA would allow states to require remote sellers, such as out-of-state online retailers, to collect sales taxes if the states simplify their sales tax laws. Currently, states can only require businesses to collect their sales taxes if the retailers have a physical presence in the state. While customers in the states that collect sales taxes are supposed to pay taxes on online purchases, they frequently do not do so and this requirement is typically not enforced.
The Senate approved the MFA in May 2013, but the bill stalled in the House. At a hearing in March, House Judiciary Committee chairman Rep. Bob Goodlatte, R-Va., said his concerns with the MFA include that the public views it as taxing the internet and that compliance with collecting the taxes is too complicated. Earlier this month, officials in Boehner's office said the MFA won't move forward in the House this year because the Judiciary Committee needs more time to review the issue. The National Conference of State Legislatures, one of the "big seven," also sent a letter to Boehner on Monday that requested the speaker allow the MFA or similar legislation to be voted on in the House or included in legislation to fund the federal government in fiscal 2015. The current continuing resolution funds the federal government until Dec. 11.
"With all due respect, legislation to give states the authority to require the collection of sales taxes by remote sellers has been under review by the Judiciary Committee for over 12 years and the subject of numerous hearings," NCSL president Debbie Smith and NCSL president-elect Curt Bramble wrote. Smith is also assistant minority leader of the Nevada Senate and Bramble is also president pro tem of the Utah Senate.
Congress needs to pass the MFA because it "must not be an obstacle to the desire of the Ohio General Assembly and other state legislatures to reduce state income taxes by using the 'new' revenue from previously uncollected sales taxes or be responsible for raising taxes in Virginia in January to fund transportation improvements," Smith and Bramble wrote.
David Quam, National Governors Association deputy director, said that state and local government groups and business groups are "undaunted" by Boehner's plans to delay action on the legislation.
"We still believe this is an issue that should be dealt with this year," Quam said. The moratorium on taxing consumer internet access expires Dec. 11, and the NGA thinks that an extension of that moratorium should only move along with the MFA, he added.
The National Taxpayers Union has estimated that revenue loss for states due to uncollected sales taxes from remote transactions is as high as $34 billion to $35 billion a year. States' ability to manage their fiscal resources is hurt by Congress' failure so far to pass the MFA, the NCSL's letter warned.
NCSL members were in Washington Tuesday to push for the MFA, but those opposed to the MFA also continue to advocate against it. The same day, Sen. Ted Cruz, R-Texas, and others spoke out against the bill at a press conference.
