WASHINGTON — U.S. Rep. Steve Womack, R-Rogers, said a recent Senate vote shows there is widespread support for legislation to require online merchants to collect sales tax receipts on Internet purchases.
The Senate last week voted, 75-24, on a proposal designed to gauge support for the “Marketplace Fairness Act” that Womack introduced in February. The House has not taken any action on the bill so far but the lopsided Senate vote could help move it forward, he said.
“The vote to me was very encouraging because of its one-sided nature,” Womack said. “There is a recognition that this is an issue in our country that is not going away and that the retail paradigm is shifting — not because of free market principles but because of tax policy.”
In a telephone interview from Little Rock, Womack said the fact that the “trial balloon passed with flying colors” would likely give retailers and local officials renewed optimism that Congress is ready to address this issue.
Womack, a former mayor, said that cities and states are losing millions of dollars in taxes owed on Internet purchases because consumers are either unaware or ignore the fact that they are responsible for paying sales and use tax. Meanwhile, brick-and-mortar retail outlets are put at a competitive disadvantage because they are required to collect the sales tax at the point of purchase.
“I don’t like higher taxes but as a former mayor I recognize the importance of retail to the community. This needs to be fixed or the traditional brick-and-mortar stores are going to be boarded up and gone because the government is picking winners and losers,” he said.
Retail stores have long been required to collect the sales tax at the point of purchase but a 1992 U.S. Supreme Court decision exempted those retailers who have no physical presence in the state. The court, however, noted that Congress could enact legislation to require it.
The legislation proposed by Womack and others would empower states to require out-of-state online retailers to collect sales taxes. The states would have to supply the necessary software and online retailers would be exempt if they have less than $1 million in annual sales.
The House bill, which Womack introduced with Rep. Jackie Speier, D-Calif., has 46 other co-sponsors including Reps. Rick Crawford, R-Jonesboro, and Tim Griffin, R-Little Rock. Sen. Mike Enzi, R-Wyo., introduced the same bill in the Senate with 28 co-sponsors including Sens. Mark Pryor, D-Ark., and John Boozman, R-Ark.
Pryor and Boozman last week voted in favor of the “test” vote on the bill which was introduced as an amendment to a budget resolution.
Although he sees momentum swinging his way, Womack is not certain when, or if, the House will take up the bill.
“I don’t know what (the Senate vote) means in the House just yet,” he said. “It remains to be seen whether there is a sufficient number of Republicans on board to justify having it come to the floor.”
The legislation is opposed by some fiscal conservatives — including Americans for Tax Reform founder Grover Norquist — who see it as a tax hike. Others, including Rep. Bob Goodlatte, R-Va., the chairman of the House Judiciary Committee, have voiced concerns that online retailers would face a complicated task of tracking and collecting taxes across multiple jurisdictions.
The Heartland Institute, a libertarian think tank, has also spoken out against the proposal saying that it would give states vast new powers over out-of-state retailers who gain no benefit from that government. The legislation is supported by the National Retail Federation.
“This is a critically important issue for retailers – both large and small – across the country. Both brick-and-mortar stores and e-commerce leaders understand that the Marketplace Fairness Act is common-sense legislation dedicated to protecting states’ rights, strengthening our communities and preserving our free market system,” said Matthew Shay, president and CEO of the National Retail Federation.
Womack acknowledges that there is a bloc of House Republicans who will not support any bill they perceive as raising taxes. But, he said, the lopsided vote in the Senate could give cover to others that fear being singled out for supporting the measure.