State lawmakers slam attempt at online sales tax law

Reuters News
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Posted: Jan 27, 2015 6:47 PM

WASHINGTON (Reuters) - U.S. states for years have asked Congress for federal legislation easing the way for them to collect sales taxes on Internet purchases, but now that a bill has been drafted, state lawmakers are resisting.

The National Conference of State Legislatures on Tuesday released a letter it sent to House of Representatives Speaker John Boehner on Monday that depicted a proposed online sales tax bill as an unconstitutional attack on states' rights.

A draft of the bill by House Judiciary Committee Chairman Bob Goodlatte "not only imposes new taxes on consumers in non-sales tax states, it raises taxes on consumers who purchase products from higher sales tax states," wrote the group, which represents state lawmakers from across the country.

"We also believe it tramples upon the 10th Amendment as it pre-empts state sovereignty to levy taxes on its own residents, establishes a new sub-national entity to govern the collection of remote sales taxes, and codifies for the first time, 'taxation without representation,'" the letter added, referring to American colonialists' battle cry in the Revolutionary War.

Currently, because of a Supreme Court decision, most states do not collect sales taxes from on-line purchases. Those state governments say they forego crucial revenue. Local retailers who must charge customers sales taxes contend they are at a disadvantage.

Some states have entered a compact to streamline sales tax collection. But they also want Congress to approve an approach for levying a tax based on a buyer's location. For example, a California consumer buying an item from a website based in Maine would pay the California sales tax.

However, the draft of the "Online Sales Simplification Act of 2015" that Goodlatte shared with House members this month would base the levy on the seller's location, according to a version the NCSL provided Reuters. Sellers with outlets in multiple states would collect the tax for the state where they have their largest presence. The legislation also creates a commission to oversee the distribution of the collections.

The NCSL wrote that would subject consumers to sales tax rates "decided by lawmakers in other states and jurisdictions."

Goodlatte, however, said a buyer-based levy would expose remote sellers to regulation by multiple states in which they have no voice.

"Each state has the right to jurisdiction within their own borders – but not in others," he said in a statement to Reuters, adding that the draft was a starting point.

(Reporting by Lisa Lambert; Editing by Dan Grebler and Andre Grenon)