State legislators facing a multibillion-dollar budget shortfall in 2015 probably can’t count on Congress to provide a long-sought windfall via taxation of Internet sales.
A bipartisan bill requiring retailers to collect state sales taxes on online purchases won’t be taken up in the U.S. House of Representatives before the end of the year, House Speaker John Boehner’s office said last week.
While supporters of the so-called Marketplace Fairness Act say they’re not giving up, opposition by the House GOP likely means tax-free Internet shopping will stick around for at least another holiday season.
In Washington, such untaxed online sales will cost the state and local governments between $700 million and $1 billion in lost revenue in the 2015-17 biennium, according to estimates by the state Department of Revenue.
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State Rep. Ross Hunter, D-Medina, chief budget writer for House Democrats, has spent years pushing for online-tax collections. But lawmakers won’t be penciling the cash in when they convene in January to deal with an estimated two-year budget shortfall of $750 million plus a state Supreme Court ruling calling for another $1.2 billion or more in K-12 funding.
“Planning your life based on the assumption that the U.S. Congress is gonna get something done about taxes — I mean, really?” Hunter said.
The stalling out of the law is good news for critics such as Fife business owner Peter Ollodart, who argues it would expose firms like his to a confusing patchwork of state sales-tax rates and laws.
“It’s just too complicated to implement. That’s always been my issue,” said Ollodart, who owns Puget Sound Instrument, which sells electronics including radios and radar devices online. He testified against the bill before Congress last year.
Backers of the law say such concerns are overblown, pointing to free tax-calculating software and a simplified sales-tax agreement entered into by many states.
The proposal has been the subject of a lobbying frenzy, with brick-and-mortar retailers including Seattle-based Nordstrom supporting passage to erase what they call an unfair advantage for online competitors.
Seattle-based Amazon has lobbied heavily for the measure, so long as it applies to its smaller online competitors.
In a statement, Amazon spokesman Ty Rogers said the company strongly favors the bill, “And we’ll continue to work with the many bipartisan sponsors and supporters to get legislation passed this year.”
Opponents include other large online sellers, including Overstock.com and eBay, which has argued that any attempt to tax Internet sales should have a much higher exemption threshold. As written, the bill would apply to all businesses with at least $1 million in nationwide remote sales.
Influential conservatives also have trashed the proposal. In an op-ed last year, anti-tax activist Grover Norquist compared the idea of allowing states to tax businesses outside their borders to ancient Rome “looting the provinces.”
Supporters counter that this would not even be a new tax. Consumers who purchase items online technically owe their state and local taxes on those purchases. But court rulings have said retailers can only be forced to collect taxes in states where they have physical stores or headquarters.
States lost an estimated $23.3 billion in 2012 as a result of those uncollected taxes, according to the National Conference of State Legislatures.
The Marketplace Fairness Act passed the U.S. Senate last year in a 69-27 vote, with 21 Republicans joining most Democrats in voting yes. Both of Washington’s U.S. senators, Democrats Maria Cantwell and Patty Murray, voted for the bill.
It has been stalled since then in the House, and despite efforts to bring it to a vote, a Boehner spokesman last week told reporters on Capitol Hill that the speaker had “significant concerns” and would not move it to a vote before the end of the year, according to Roll Call.
In a statement, Gov. Jay Inslee called the proposal “among the most important actions Congress can take to support our state this year” and urged the state’s congressional delegation to back a quick vote.
The bill is supported by all five Democrats in Washington’s House delegation. The state’s five Republican representatives ignored requests for comment or declined to give any position on the bill last week.
The likely demise of the proposal for this year means supporters will have to start over again in the new Congress, now controlled by Republican majorities in both the House and Senate.
“We could receive manna from heaven, too,” said Hunter. “I’m not spending a lot of time planning on it happening.”