Internet sales tax legislation has gained momentum on Capitol Hill this month but the leading proposals still face opposition from two powerful groups: small business advocates and anti tax conservatives.
Congressional Quarterly Article By Ambreen Ali
The Senate Commerce Science and Transportation Committee meets Wednesday to discuss the Internet sales tax bill S 1832 written by Michael B. Enzi R Wyo. right on the heels of a July 24 House Judiciary Committee hearing on a companion measure HR 3179 by Steve Womack R Ark.
The legislation would overturn a 1992 Supreme Court decision and allow states to tax online retailers outside their borders. Cash strapped states and localities are eager to collect a projected 23 billion in annual revenue and the sponsors are ready to pounce: Enzi tried unsuccessfully this month to attach his bill to another measure on the Senate floor while Womack is eyeing action in the lame duck session according to an aide.
Both measures would make exemptions for small businesses. The House legislation would exempt businesses with less than 1 million in annual remote online sales while the Senate bill caps it at 500 000. But neither satisfies small business advocates.
Democratic Sen. Ron Wyden questions why the legislation requires online retailers many of which are small operations to remit the tax on behalf of consumers. Businesses in his home state of Oregon which has drawn Internet companies because it does not have a sales tax would be required to comply with the myriad of tax laws passed by other jurisdictions.
"The question is why aren t those states collecting those taxes owed rather than transferring the tax collection function from the state government to a small business located thousands of miles away?" Wyden said in an interview. He is a member of the Senate Finance Committee where Enzi s bill awaits action.
Small Business Impact
Wyden joined Sen. Kelly Ayotte R N.H. last year in offering a resolution S Res 309 opposing "new burdensome or unfair tax collecting requirements on small online businesses and entrepreneurs." He also wrote a 1998 law PL 105 277 that prohibits the government from enacting Internet specific taxes.
Wyden said he stands by his position despite the recent push by brick and mortar stores and giant online retailer Amazon.com Inc. to pass the Internet sales tax measure.
"I don t see much new today that didn t exist 15 years ago other than the fact that Amazon has come out for it " Wyden said. "My grief has never been for the Amazons. I m concerned about future Amazons. If you force these small entrepreneurial businesses to comply with tax jurisdictions of over 5 000 separate entities where you hear about a cookie treated one way and chocolate treated another way that can be very harmful to the effort to create jobs."
In the House Democrat Zoe Lofgren and Republican Dan Lungren both of California introduced a resolution H Res 95 similar to Wyden s. During the Judiciary Committee hearing last week Lofgren said the Womack bill s small business exemption does not go far enough.
"Since we re looking to both Main Street and online entrepreneurs to grow our economy we need to carefully consider how new federal requirements like collecting online sales taxes would impact small businesses " she said.
Lofgren submitted for the hearing record a list of 77 businesses in her Silicon Valley district that are concerned about the proposal. Her district also includes eBay Inc. which has led opposition to the tax proposals.
EBay backs a suggestion by Lofgren to allow the Small Business Administration to set the small business exemption according to Brian Bieron a government relations director for the company. For electronic retail the agency s definition includes businesses with up to 30 million in sales a figure proponents say is so high it would nearly render the legislation meaningless.
"Our top priority is to make sure that all members understand that the Internet comes from their state too and that Internet retail is done by local small businesses in communities everywhere " Bieron said.
Conservative Challenge
In addition to the small business opposition proponents of the Internet tax bill face a formidable challenge in swaying fiscal conservatives.
The Enzi bill s 19 cosponsors include four Republicans; Womack s measure has 23 Democratic and 26 GOP backers. Other Republicans could be hesitant to back a bill that voters could perceive as a new tax.
Republican governors have countered that the legislation promotes the right of states to enforce existing tax laws. Amazon released a study last week showing that conservative voters back the bill when it is presented as a states rights issue.
But conservative groups are not buying that argument. The Heritage Foundation recently released a report opposing the legislation. And Americans for Tax Reform President Grover Norquist contends that the bill sets "a dangerous precedent" in allowing states to tax companies outside of their borders.
"If you have to change the law and when you change the law you collect more taxes it s a tax increase " Norquist said. "If you don t vote in the state don t live in the state have no workers in the state there is no limit to what the Alabama Collector of Revenue can do to you."
Womack tried to rebut that argument at the House hearing saying: "This is not a new tax. This is an existing lawfully due tax imposed on consumers."
Given the split among Republicans some conservative groups have sat out the fight. The Club for Growth has not taken an official stance on the legislation. Neither Heritage nor Norquist s group would say whether they would include the bill in their annual congressional scorecards.
Still a House Republican Study Committee aide expressed doubt that many anti tax conservatives would support the bill especially before the November elections.
"Conservatives generally aren t interested in raising costs for businesses in Colorado for example by forcing them to become tax collectors for every other state " the aide said.
To discuss this and how Montana businesses will be affected please contact
Lance Trebesch
Elk River Systems
lance@elkriversystems.com
1.888.771.0809