Taxation of Online Sales Facing Congressional Uncertainty

MACo , among many stakeholders, followed as legislation made its way through the U.S Senate in May of this year – but lack of action in the House of Representatives has seemingly stalled the issue, at least temporarily.  Now that Congress has reconvened, the House sponsor, Representative Steve Womack, is trying to expand the focus on his legislation while facing renewed opposition. As reported in a Governing blog, Fed Watch:

House Speaker John Boehner quickly expressed skepticism of the legislation, as did Rep. Bob Goodlatte (R-Va.), chairman of the House Judiciary Committee, which would handle the legislation.

For Womack’s legislation to move forward, it will have to emerge from Goodlatte’s committee, which won’t be an easy task. The Virginia congressman does not support the legislation that emerged from the Senate, saying it’s too complicated and opens the door for states to try to enforce tax issues beyond their borders.

“I am open to considering legislation concerning this topic, but these issues, along with others, would certainly have to be addressed,” he said earlier this spring.

At some point — it’s not exactly clear when — Goodlatte is expected to release a “statement of principles” that will indicate his approach to the legislation. Womack said he doesn’t know what they’ll contain, but he has some concerns with how the bill might be altered.

In Maryland, passage of this legislation would have a direct effect on the sales tax rate applied to a gallon of gasoline.  The Transportation Infrastructure Investment Act of 2013 (Ch. 429, Acts of 2013) would impose a 5% sales tax on motor fuel, phased in over four fiscal years. However, the final two percent would not take effect if federal legislation is enacted by December 1, 2015 authorizing states to impose their sales tax on internet sales.

A previous blog post also summarizes the effects the passage of the Marketplace Fairness Act of 2013  would have on state and local governments. While the legislation would allow states  and local governments to impose their existing sales tax on internet sales, the legislation also requires states to simplify or “streamline” their sales tax structure to make it easier for online companies to comply with the new requirements.  The implementation of a “Streamlined Sales Tax Agreement” could have fiscal consequences depending on the option implemented.