WASHINGTON - A bill introduced in the House on Monday by Rep. Jason Chaffetz, R-Utah, that would authorize states to require out-of-state online retailers to collect their sales taxes is drawing praise from state and local government and retail groups.
"It's a good bill," said Max Behlke, manager of state-federal relations for the National Conference of State Legislatures. "It's the bill that the president is going to sign into law" to address the Internet sales tax issue, he added.
The bill, called the Remote Transactions Parity Act of 2015 or H.R. 2775, has a bipartisan group of 16 cosponsors. It has been referred to the House Judiciary Committee. Remote transactions include out-of-state online retailers.
State and local government groups have been urging Congress to pass Internet sales tax legislation because currently they can only require retailers to collect their sales taxes if the retailers have a physical presence in their states.
Chaffetz's bill follows the same principles as another online sales tax bill - the Marketplace Fairness Act -- but "fleshes out the intent" of it, said Behlke.
The Senate passed the MFA in 2013. But that bill stalled in the House because the chairman of that chamber's judiciary committee, Rep. Bob Goodlatte, R-Va., had concerns with it. In March, a bipartisan group of senators reintroduced the MFA, with a few small changes from the bill that the Senate had previously approved.
Like the MFA, Chaffetz's bill uses destination sourcing, having retailers collect sales taxes at the rate of the purchaser's state. Also like the MFA, the RTPA would only compel out-of-state online retailers to collect their sales taxes if they have simplified their sales tax laws.
However, the two bills differ in how they provide exemptions from tax collection requirements for small businesses.
Under Chaffetz's bill, there is an exemption for businesses with: $10 million or less in annual gross receipts in the first year after the effective date, $5 million or less in the second year; and $1 million or less in the third year. Remote sellers are not exempt if they use electronic marketplaces "for the purpose of making products or services available for sale to the public." Under the MFA, remote sellers are always exempt if they have annual gross receipts of $1 million or less.
Another difference is that under Chaffetz's bill, remote sellers with annual gross receipts of less than $5 million cannot be audited by a state unless there is reasonable suspicion that the businesses engaged in intentional misrepresentation or fraud. This provision is intended to address concerns that under the MFA, small businesses could be audited multiple times, state government group officials said.
Chaffetz's bill "represents a workable solution" that is in line with what states have been doing for the last 10 years, said David Quam, deputy director at the National Governors Association. He added that the bill is "the most promising option" for action in the House on this issue.
Many local government, business groups and companies are supporters of the Chaffetz bill, according to a list from the congressman's office.
"The bill will eliminate the online sales tax collection loophole, which distorts competition, the free market and unfairly favors online sellers at the disadvantage and expense of local communities, merchants and small business owners and their employees," said National Retail Federation senior vice president for government relations David French.
"The bill doesn't raise any new taxes - it simply enables cities to collect sales taxes that are already owed," said National League of Cities president and Salt Lake City mayor Ralph Becker.
The lead Senate sponsors of the MFA said they are encouraged by the introduction of the RTPA. Earlier this year, Goodlatte released a discussion draft of Internet sales tax legislation that takes a different approach from Chaffetz's bill and the MFA. State and local groups have criticized Goodlatte's proposal, saying it would raise taxes for many people
Behlke said he thinks the RTPA will get so much support that the House Judiciary Committee will have to hold a vote on it.
