Passage of Marketplace Fairness Act in House Unlikely, Critics Say
Critics of the Marketplace Fairness Act don’t expect the measure to pass in the House, several told us. Some believe the MFA, which would impose an Internet sales tax on consumers buying from out-of-state companies with more than $1 million in sales, would give more authority to states, they said. Others think the MFA is an intrusion of government power and will hurt “brick and click” small businesses, they said. Unless the MFA undergoes substantial changes, it will not pass in the House, they said.
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Seven principles that should govern an Internet sales tax, released in September by the House Judiciary Committee and Chairman Bob Goodlatte, R-Va., were “intended to guide discussion on this issue and spark creative solutions,” said a news release issued by the committee then (http://1.usa.gov/1iDhnlU). The principles were tax relief, tech neutrality, no regulation without representation, simplicity, tax competition, states’ rights, and privacy rights. NetChoice said the MFA failed to meet any of the principles (http://bit.ly/193zonm). For example, if the MFA passed, “a small business would need to comply with over 10,000 tax jurisdictions and face tax auditors from up to 46 states and 550 tribal lands,” thus failing the simplicity standard, said NetChoice policy counsel, Carl Szabo, who does not support the bill.
But Sen. Lamar Alexander, R-Tenn., in a speech at the National Conference of State Legislatures on Wednesday, said, “To me, [the MFA] is a states’ rights issue. This is a question of, ‘Do states or does Washington decide tax policy in Tennessee or your state?'” Alexander introduced the bill along with Sen. Dick Durbin, D-Ill., and others. It passed the Senate in May.. “The Senate passed the legislation by a good margin -- half the Republican caucus supported it, a large percentage of Democrats did. There’s no reason in the world the House can’t pass it in 2014 -- the House should pass it in 2014,” he said. “And then you make your own decision about what to do with your tax policy.”
The “more likely outcome,” however, is that the House will come up with a new bill “that matches all of Goodlatte’s seven principles,” said Szabo. A House Judiciary aide for Goodlatte said, “Following the release of our online sales tax principles, we continue to welcome ideas consistent with those principles from interested parties; however, we are not actively drafting legislation at this time.”
The MFA is not likely to go “anywhere in this Congress,” said Katie McAuliffe, executive director-digital liberty at Americans for Tax Reform, which opposes the bill. The MFA is a “massive expansion of state tax authority” and has a 70 percent negative approval rating from the public, she said. McAuliffe said it could cost between $30,000 and $300,000 per company to integrate software to accommodate new tax audits from the MFA.