Grab your wallets: House to consider internet sales tax

Because we're just not taxed enough, don't you know?

Old-line retailers are pushing Congress to enact the sales tax bill passed by the Senate last year to "even the playing field." What they rarely mention is that it will drive some smaller online outlets out of business while hugely complicating online purchases due to thousands of state and local tax jurisdictions that have to be considered.

The Hill:

Supporters and opponents of online sales tax proposals are focusing their lobbying energy on Goodlatte (R-Va.), who has released a set of seven principles that an online sales tax bill would have to meet in order to be considered by his committee

"House Judiciary has a busy schedule," but Goodlatte has plans to hold a hearing on Internet sales taxes in the first half of the year, according to Steve DelBianco, executive director of NetChoice, which represents Facebook, Yahoo and online sales tax critic eBay.

Goodlatte "wants to hear legislative concepts that would fit his principles," DelBianco said.

A Judiciary aide declined to comment on whether the committee has plans for a hearing. The committee is "not actively drafting legislation at this time" but continues "to welcome ideas consistent with those principles from interested parties," the aide said.

Few people involved in the push expect the chairman to move quickly on a bill, especially now that he is being tasked with leading a legislative push on immigration reform.

Still, lobbyists are optimistic that the chairman can craft a bill with broad support.

The fight over an online sales tax bill shifted to the House last summer after the Senate passed the Marketplace Fairness Act, which would allow states to collect sales tax on purchases that citizens make from out-of-state online retailers.

Currently, state sales tax is technically due for all purchases, but states only have the authority to collect sales tax on purchases that citizens make from retailers with a physical presence in each state.

Supporters say the bill would even the playing field between online retailers and brick-and-mortar stores. Opponents argue it would create mass confusion as online retailers are forced to navigate tax rates and rules for nearly 10,000 state and local tax jurisdictions.

Goodlatte has said that he wants to consider the issue carefully.

His "principals" specified that an online sales tax bill should not create a new or discriminatory tax, should not create greater burdens for online retailers than brick-and-mortar stores and should give online retailers "direct recourse" to challenge taxes an compliance burdens.

Additionally, an online sales tax bill should be simple enough for small businesses to easily follow, should encourage states to compete on tax structures, should respect state sovereignty and should protect customer privacy, he said.

Those are actually pretty good principles to follow when considering an internet sales tax. Unfortunately, they will be next to impossible to meet. The "greater burden" principle will be especially difficult to achieve. Brick and mortar stores only have to figure sales tax for their specific location - state, county, and local. Online retailers will have to develop software that can be plugged in to their existing checkout system that can handle transactions from everywhere in the US - a daunting and very expensive proposition.

The online shopping experience is so much easier with far less hassle that old line retailers can't match. In store purchases are fraught with bad service, limited choices, and all the hassle of driving and parking. Complicating the online shopping experience may benefit some chains, but in the end, internet sales will continue to rise even for the brick and mortar outfits.

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