Congress Introduces Remote Sales Tax Bill
Rep. Jason Chaffetz, R-Utah, and a bipartisan group of lawmakers have teamed up to introduce new legislation that aims to make it easier for states and localities to collect sales taxes on online purchases and other remote transactions.
H.R. 2775, the Remote Transactions Parity Act, relies on the Streamlined Sales and Use Tax Agreement, like a predecessor bill, the Marketplace Fairness Act, which was passed by the Senate in 2013 but was never voted on in the House. The new bill will be referred to the House Judiciary Committee because of its interstate commerce nexus. It aims to promote states’ rights, and bring sales tax parity to e-retailers and brick-and-mortar stores.
In addition to Chaffetz, the lead cosponsors of the bill include Reps. Steve Womack, R-Ark., John Conyers, D-Mich., Jackie Speier, D-Calif., Kristi Noem, R-S.D., Steve Stivers, R-Ohio, Peter Welch, D-Vt., and Suzan Delbene, D-Wash.
“A broad coalition of large and small businesses, online and brick-and-mortar retailers, and state and local government leaders asked Congress to modernize our nation's outdated sales tax collection framework,” said Chaffetz in a statement Monday. “RTPA would modernize current law and strike the appropriate balance between sales tax parity and a state’s right to manage tax policy within its borders. This bipartisan legislation was developed as part of an open and transparent process, with input from stakeholders on all sides of the issue. I look forward to working with all Members of the House and Senate to return more power to the states and create parity within the retail community.”
There are some differences from the earlier legislation, the Marketplace Fairness Act, which could draw more support from Republican lawmakers in the House. RTPA includes significant audit protections for small businesses and, except in the case of intentional misrepresentation or fraud, exempts businesses under $5 million in gross receipts from remote state audits entirely.
In addition, the legislation would exempt more small businesses from collection requirements in the first year. While the MFA only exempted businesses under $1 million in sales, the RTPA in the first year exempts small business under $10 million, phasing to $5 million in the second year and $1 million in the third.
Finally, the RTPA calls for states to give remote sellers the software needed to collect and remit the taxes due. It also requires states to pay for set-up, installation, and maintenance costs on the software.
Additional cosponsors include Lou Barletta, R-Pa., Scott Rigell, R-Va., Renee Ellmers, R-N.C., Carlos Curbelo, R-Fla., Robert Dold, R-Ill., Ted Deutch, D-Pa., John Larson, D-Conn., and Derek Kilmer, D-Wash.
Retail Industry Support
The legislation drew wide support from most retail groups, including the National Retail Federation.
“The nation’s retailers welcome the introduction of Remote Transactions Parity Act and commend House Oversight and Government Reform Committee Chairman Jason Chaffetz for working to address and resolve this retail priority,” said NRF senior vice president for government relations David French in a statement. “RTPA will provide sales tax parity at the point of purchase, so that Main Street retailers do not face a competitive disadvantage because they are required to collect the sales tax owed on purchases while remote and online sellers are not required to collect the tax. Importantly, the bill adds significant simplification to the sales tax collection process, removing both the compliance and audit burdens for remote sellers that choose to use certified software providers. And the bill does this while also upholding the House Judiciary Committee’s Principles on Internet Sales Tax."
The Retail Industry Leaders Association also issued a statement of support. “Main Street retailers have long maintained that requiring some businesses to collect taxes while giving others a free pass amounts to little more than a government subsidy,” said RILA executive vice president for government affairs Jennifer Safavian. “Online sellers no longer need special treatment—it’s time for Congress to close the online loophole and restore basic free market competition for retailers across the country. Retailers aren’t asking for handouts or carve outs from Congress, we just want everyone to play by the same rules. We’re open to any solution that provides clarity and fairness for both retailers and consumers—and that means no consumer should be paying a tax rate where they don’t live and vote. ”
The International Council of Shopping Centers also applauded the introduction of the Remote Transactions Parity Act of 2015. "The shopping center industry would like to thank this group of retail champions in the House for their leadership in introducing a bill that provides true parity at the time of sale and levels the playing field for brick-and-mortar businesses," said Michael P. Kercheval, president and CEO of ICSC, in a statement. “Congress has considered efairness legislation for more than a decade. Earlier this year, the Senate introduced the Marketplace Fairness Act of 2015, which enjoys broad bipartisan support. Today's development signals that the House of Representatives is prepared to move forward with legislation that will provide local retailers with a fair chance to compete.”
Support from Governors and Mayors
The National Governors Association also expressed its support, saying, “The National Governors Association supports the legislation introduced by Rep. Jason Chaffetz to level the playing field for Main Street and e-street retailers instead of picking winners or losers in a 21st century economy,” the NGA said in a statement. “The nation’s governors have long called for the authority to modernize their sales tax systems and collect the taxes already owed to their states. This is an issue that must be solved before Congress takes up any other state tax issues. NGA will continue to work with the House to pass legislation this year.”
The National League of Cities also weighed in with its support. The president of the group, Salt Lake City mayor Ralph Becker, said, “We applaud and support the legislation introduced today by Representative Chaffetz that will level the playing field between brick and mortar retailers and their online counterparts. It's about fairness. The bill doesn't raise any new taxes—it simply enables cities to collect sales taxes that are already owed. We call on the House to move swiftly and pass the bill this year because our cities and local businesses can't afford to wait."
However, a policy research group known as the R Street Institute expressed its opposition to the bill, claiming the RTPA would dismantle proper limits on state tax-collection authority and could potentially cause serious damage to electronic and interstate commerce.
"Current law dictates that a state can only require a business to collect sales tax if it is physically present in that state," said R Street executive director Andrew Moylan in a statement. "That precedent is the result of a Supreme Court decision grounded in a bedrock foundational principle of federalism: states must not be allowed to extend their tax and regulatory authorities beyond their borders."
The group argued that the bill would create an imbalanced playing field between brick-and-mortar and online sales. Under the RTPA, only remote retailers would be required to ascertain their customers' place of residence, look up the appropriate rules in nearly 10,000 taxing jurisdictions and then collect and remit sales tax for a distant authority with which they may have no tangible connection.
"Imposing this unworkable collection standard on remote retail sales only, and subjecting online retailers to as many as 46 state tax audits in the process, would not only be unfair but would result in enormous complexity and damage to interstate commerce," Moylan said.
R Street is encouraging Congress to pursue a simpler approach based on “origin sourcing,” which would align remote sales tax collection rules with those governing brick-and-mortar sales.
Conservative groups such as Americans for Prosperity, Americans for Tax Reform and Heritage Action have joined R Street in opposing the bill. The coalition, which also includes the Competitive Enterprise Institute, FreedomWorks and the National Taxpayers Union among others, sent an open letter Tuesday to members of the House of Representatives outlining the many problems with the RTPA.
"Like the failed MFA, the new RTPA would dismantle proper limits on state tax-collection authority while potentially causing serious damage to electronic and interstate commerce," the coalition wrote. "Furthermore, the bill would create a decidedly unlevel playing field between brick-and-mortar and online sales."
Sen. Ron Wyden, D-Ore., the ranking Democrat on the Senate Finance Committee, criticized the bill Tuesday. “What this proposal comes down to is essentially a brand new national sales tax managed by a privatized tax-collecting bureaucracy that voters never approved,” he said.