House Judiciary Chair Circulates Radically Different Sales Tax Bill

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    U.S. House of Representatives Judiciary Chair Bob Goodlatte (R-VA) has circulated draft sales tax fairness legislation that would ask most states to radically change their sales tax systems, according to media reports.

    Under Goodlatte’s draft legislation, states looking to be a part of the agreement would be required to base sales tax collection on the tax rate designated in the location of the seller (termed origin-based sourcing), as opposed to the location of the buyer (known as destination-based sourcing), according to media reports. Currently, most states are destination-based.

    Sales tax money collected under the law would then be sent to a multi-state clearinghouse (set up under the law), where the tax money would be redistributed to the state in which the sale occurred. The system proposed in Goodlatte’s draft is sometimes referred to as a “Hybrid-Origin” tax system. The bill would also invalidate all affiliate nexus laws on the books.

    The Goodlatte draft was met with a great deal of skepticism from e-fairness proponents and, given the inability of the last Congress to pass the Marketplace Fairness Act, which had wide bipartisan support and the backing of retail trade groups, it is unclear what chance Goodlatte’s bill might have in the new Congress.

    “Don’t like it, don’t like,” Rep. Jason Chaffetz (R-UT) told Bloomberg. And National Retail Federation spokesman Stephen Schatz noted that NRF was “skeptical” about the approach and is talking to tax experts about whether the bill is feasible.

    The American Booksellers Association shares NRF’s concerns. “While we continue to believe that a federal solution is the best option, given the many difficulties inherent in implementing this sort of hybrid-origin system, we believe the current draft proposal is highly problematic,” ABA CEO Oren Teicher said, adding that this was yet another reason that ABA was stepping up its advocacy efforts in states. “As more states pass e-fairness laws, we hope it will spur the House to give Main Street retailers the sincere effort they deserve from their lawmakers to get federal e-fairness finally passed.”

    Conversely, eBay and NetChoice, a trade association of e-commerce businesses and online consumers, hailed Goodlatte’s draft bill. Amanda Miller, an eBay spokesperson said in a statement: “We want innovative small businesses to have room to grow and not be burdened by additional tax and compliance requirements when they operate online, which was one of Chairman Goodlatte’s fundamental principles that helped shape his work on this issue,” as reported by Bloomberg.

    “With elegant simplicity, this bill treats sales tax obligations the same, whether you entered a store by foot, by mail, by phone, or via the Internet,” Steve DelBianco of NetChoice told The Hill. “In short, this bill represents a compromise that gives states the revenue they’re missing, without punishing every small business that goes online to reach customers around the country.” 

    The Hill speculated that the draft is “unlikely to find much support among retail groups that have lobbied for the Marketplace Fairness Act.”