Judiciary Committee Takes Up Sales Tax Fairness

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Releases “basic principles” of sales tax fairness

Approximately four months after the Senate overwhelmingly passed the Marketplace Fairness Act — sales tax fairness legislation that would allow states to require remote retailers to collect and remit sales tax —  the U.S. House of Representatives is addressing the issue of sales tax fairness. On Wednesday, September 18, the House Judiciary Committee released its seven “basic principles” for sales tax fairness legislation.

The principles are meant to provide a “starting point for discussion” on the issue in the House, said Committee Chairman Bob Goodlatte (R-VA). In a statement, Goodlatte said that he was looking “forward to hearing fresh approaches to the issue and continuing the discussion.” To develop these principles, the Committee received input directly from taxpayers, industry and trade groups, and representatives of state and local governments.

Included in the principles is a call for simplicity: “Governments should not stifle businesses by shifting onerous compliance requirements onto them; laws should be so simple and compliance so inexpensive and reliable as to render a small business exemption unnecessary.” (Read the basic principles in full below.

The principles also urge that the tax compliance burden on online sellers should not be less or greater “than that on similarly situated offline businesses.”

The Marketplace Fairness Coalition noted that the principles were “a great first step in the House of Representatives towards closing the online loophole and restoring basic free market competition. It’s our hope that the Judiciary Committee will move forward quickly toward legislative text so that the House can build on the broad and bipartisan support this effort received in the Senate earlier this year.” It is expected that discussions will continue regarding the specifics of the final legislation.
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Basic Principles on Remote Sales Tax 

1. Tax Relief — Using the Internet should not create new or discriminatory taxes not faced in the offline world. Nor should any fresh precedent be created for other areas of interstate taxation by States. 

2. Tech Neutrality — Brick & Mortar, Exclusively Online, and Brick & Click businesses should all be on equal footing. The sales tax compliance burden on online Internet sellers should not be less, but neither should it be greater than that on similarly situated offline businesses.

3. No Regulation Without Representation — Those who would bear state taxation, regulation and compliance burdens should have direct recourse to protest unfair, unwise or discriminatory rates and enforcement.

4. Simplicity — Governments should not stifle businesses by shifting onerous compliance requirements onto them; laws should be so simple and compliance so inexpensive and reliable as to render a small business exemption unnecessary.

5. Tax Competition — Governments should be encouraged to compete with one another to keep tax rates low and American businesses should not be disadvantaged vis-a-vis their foreign competitors.

6. States’ Rights — States should be sovereign within their physical boundaries. In addition, the federal government should not mandate that States impose any sales tax compliance burdens. 

7. Privacy Rights — Sensitive customer data must be protected.