WASHINGTON — Anti-tax advocates stood outside the U.S. Capitol on Tuesday and slammed legislation sponsored by Rep. Steve Womack, R-Rogers, to require out-of-state merchants to collect sales tax on Internet purchases.
“This is a bad bill,” said Sen. Ted Cruz, R-Texas. “What you are seeing is Democrats and Republicans, arm in arm with giant corporations, saying let’s raise $23 billion on consumers all over the country. That’s crazy.”
The “Marketplace Fairness Act” would require merchants with annual online sales of more than $1 million to collect sales tax receipts even if the retailers have no physical footprint in the state.
In Arkansas and other states with a sales tax, individuals are required to pay “sales and use” tax on out-of-state purchases but a small fraction actually comply.
Womack said brick-and-mortar retailers are at a disadvantage now because shoppers can get a price break from online merchants who do not collect the sales tax.
While retail stores have long been required to collect the sales tax at the point of purchase, a 1992 U.S. Supreme Court decision exempted those retailers who have no physical presence in the state. However, the court noted Congress could enact legislation to require it.
As mayor of Rogers, Womack said he worked hard to get Best Buy to open a store in his community that now employs about 70 people. The company is struggling as consumers turn to the Internet to purchase electronics, he said.
“If we put plywood up in their windows and close them down what happens to those jobs?” Womack said during an interview Tuesday in the Capitol. “At some point we have to speak up for local retailers who are investing in our communities. Instead, we are choosing to look out for the interests of people with no connection at all to our state.”
The legislation sailed through the Senate a month ago but faces more opposition in the Republican-controlled House. Anti-tax groups are taking no chances.
Grover Norquist, president of Americans for Tax Reform, warned that the bill would lead to higher taxes for all as states and localities feel free to raise taxes on those who cannot oust them from office.
“Politicians of all ages have lusted after El Dorado — the idea of imposing taxes on people who can’t vote against you,” said Norquist
Mike Needham, chief executive officer for Heritage Action for America, said he does not expect House Speaker John Boehner will allow a vote on the bill. If he does, lawmakers who vote in favor of it will be graded harshly, he said.
Womack conceded that his legislation faces an uphill battle given the pressure from anti-tax conservatives, but he said the problem for brick-and-mortar retailers is not going away.
“Congress should act to solve this problem. I think eventually they will do it,” Womack said.
Proponents of the “Marketplace Fairness Act” plan to hold a press conference Wednesday at the Capitol.