The Washington PostDemocracy Dies in Darkness

State Republicans making the case for Internet sales tax to Congress

Rep. Bob Goodlatte (R-Va.), chairman of the House Judiciary Committee, is the key to the future of the Marketplace Fairness Act. (Bill O’Leary/The Washington Post)

Republicans aren’t usually the ones making the case for taxes, but on Thursday, state lawmakers from across the country are bombarding Capitol Hill to push a measure that would require Internet-based companies to remit sales taxes back to the states.

As it stands, state and local sales taxes apply to online sales, but Internet retailers don’t have to charge that tax if they don’t have a physical presence in a state, thanks to a 1992 Supreme Court ruling. The onus for paying the taxes falls on the buyers, who almost never actually pay that tax.

Brick-and-mortar retailers say that puts them at a deep disadvantage. Customers can window shop in their stores, then buy the same item online for a cheaper price, in part because a sales tax doesn’t apply.

“This is a very important thing to level the playing field for all the retailers,” Luke Kenley, an Indiana Republican who chairs the state Senate Appropriations Committee, said Thursday.

The Senate passed the Marketplace Fairness Act earlier this year, but the measure has been stuck in the House Judiciary Committee, where chairman Bob Goodlatte (R-Va.) says he still has concerns.

In September, Goodlatte and Rep. Spencer Bachus (R-Ala.) released a list of seven principles that an Internet tax bill would have to meet. Lawmakers said the Marketplace Fairness Act would meet most of those principles already. Goodlatte is concerned that the bill would exempt some smaller online-only retailers, giving them a leg up.

South Dakota state Sen. Deb Peters, who chairs the Appropriations Committee in her state, said the technology is available to allow online retailers to comply with the hodgepodge of state laws. She cast the measure in Republican terms, as a matter of states’ rights.

“Congress needs to authorize the ability for states’ rights,” Peters said. “If Congressman Goodlatte has a bill, whatever you want to call it, that authorizes states to do what states can or will do, that’s all we need.”

“Without the permissive aspect of what we’re seeking here on a states’ rights issue, 50 states and U.S. jurisdictions are being held hostage,” added Alabama state Rep. Greg Wren (R), a member of his state’s Ways and Means Committee. “If the definition federalism has evolved to a point where federalism now means there can be a userpation of states’ rights, then we all need to go back to school.”

The Republicans will meet Thursday with leading members of Congress, including Rep. Paul Ryan (R-Wis.), the chairman of the House Budget Committee. They met with Goodlatte last month, but they don’t have a meeting scheduled with the chairman this week.

“We admit it, he’s the key,” Kenley said.