On Wednesday, the House Judiciary Committee set a high bar for taxing remote sales and reset the clock on a broader debate over the Marketplace Fairness Act. The assembled witnesses clearly communicated that there is no simple federal solution and that any system put in place should be heavily weighed against the potential for disrupting remote sales.
Chairman Goodlatte opened the event by announcing the Senate passed MFA has fundamental defects on multiple levels. In clear language, he called the legislation, “not sufficiently simple,” declared that MFA advocates had misrepresented a “free software” solution by ignoring integration costs while also simultaneously turning a blind eye to the direct mail industry.
How far we’ve come in one year.
Committee members heard from former Representative Chris Cox who testified on behalf of NetChoice, a TruST founding member. Cox underscored that the crux of the issue is not about remote sellers and catalog businesses wanting to skip out on paying sales tax; but rather the compliance burdens and costs involved with the ability of remote sellers to successfully wade through a complex new tax system.
In response to Chairmain Goodlatte’s request for proactive proposals, Cox presented a system that would treat all entrepreneurs equally by allowing every business (whether brick-and-mortar, online, or catalog) to continue to file sales tax returns in their own states. The Home Rule & Revenue Return would give each state the opportunity to join a multi-state compact to enable revenue sharing.
The origin-based tax proposal is similar to the method of tax collection for conventional bricks-and-mortar retailers using the tax rate of the county or state where the store is located and the sale occurs. It’s a workable solution that leaves behind the regulatory and audit nightmare proposed by the MFA.
With so much at stake, it’s a positive sign that Congress is attempting to be more deliberative than the Senate in considering the elements of a workable remote sales tax bill.
The thoughtful and deliberative process called for by Chairman Goodlatte is much more likely to produce a remote sales tax solution that benefits consumers and businesses. The hearing was a step in the right direction, but there is still a long way to go before we’re out of the woods.