WASHINGTON — Congress will likely take up an online sales tax bill before the end of the year, the chairman of the Senate Commerce, Science and Transportation Committee told reporters after a congressional hearing Wednesday.

Sen. John Rockefeller, D-W.Va., said he expects Congress will move on the Market Place Fairness Act in the lame duck session after the November elections.

"There is growing bipartisan consensus around the country that Congress should address this issue," Rockefeller said in his opening statement. "This debate is not about imposing new taxes. It's just allowing states to collect taxes that are currently owed under existing law."

Rockefeller held a hearing examining a bill that would allow states to collect online sales taxes. The MFA, S.1832, was introduced by Sen. Mike Enzi, R-Wyo., last year and has over 240 supporters including state and local groups, business organizations and online giants Amazon and eBay.

Amazon has "long supported an even-handed nationwide framework for state sales tax collections and only Congress may create this framework," Paul Misener, vice president for global public policy of Amazon.com, said in his testimony at the hearing.

Congress had been debating an online sales tax law for two decades since a 1992 Supreme Court ruling in Quill Corp. v. North Dakota said that states can only require an out-of-state seller to collect taxes on residents if the seller has a physical presence in the state.

"It is critical that Congress eliminate the sales tax collection discrimination that exists between brick-and-mortar and remote retailers and allow the free market to operate so all retailers can compete on a level playing field," said David French, senior vice president of the National Retail Foundation.

The NRF estimates that local retailers have a 6% to 10% disadvantage to when compared to most online retailers who don't have to collect sales taxes.

Rockefeller said his home state of West Virginia loses $100 million each year to uncollected online sales taxes. The National Conference of State Legislatures estimates states will lose $23.3 billion in revenue this year from uncollected sales taxes.

While many on the Senate Committee showed support for the bill, Tea Party icons Sens. Jim DeMint of South Carolina and Kelly Ayotte of New Hampshire both challenged it and agreed with the only witness who opposed the bill.

"Amazon and big-box chains benefit if Congress allows states to impose new tax collection burdens on their smaller online-only competitors," said Steve DelBianco, executive director of NetChoice, a coalition of trade organizations that includes Overstock.com, eBay and Oracle Corp.

Ayotte agreed with DelBianco and argued that the bill would impose unfair burdens on states like New Hampshire, which doesn't have a sales tax. Four other states do not have a statewide sales tax: Alaska, Delaware, Montana, and Oregon.

"Why should New Hampshire businesses be penalized because we chose not to have a sales tax and as a result of it, frankly we have a leaner state government," Ayotte said. "This bill in my view tramples on New Hampshire's choice not to have a sales tax."

"Let's be clear about what this bill does: it mandates that online companies with no physical presence in the state collect sales taxes for any state that demands it," DeMint said. "This is a mandate on business."

The bill also contains a $500,000 small business exemption. A similar version of the online sales tax bill in the House proposed a $1 million small business exemption. During Wednesday's hearing, Sen. Mark Begich, D-Alaska, asked the witnesses if they thought the $500,000 limit was a reasonable threshold.

DelBianco said the limit was too low and collecting and remitting sales taxes in other states would be burdensome. "Make no mistake about it — $500,000 in retail sales is still just a sole proprietor operation," he said.

Misener disagreed and said that the threshold was too high. Assuming that there are 5 million online sellers around the nation, only 1% of those businesses sell more than $150,000 per year, he said, adding that it would be a fraction of the 1% that would be affected with the exemption.
"We would prefer one lower, but we are willing to live with $500,000," Misener said.

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.