PublishedJune 18, 2015

Rep. Chaffetz Introduces Latest Edition of Online Sales Tax Legislation

Washington — This week, Rep. Jason Chaffetz (R-Utah) introduced H.R. 2775, the Remote Transactions Parity Act (RTPA), the latest legislative incarnation to force online retailers to collect sales and use taxes regardless of physical presence. The RTPA takes the same basic approach as the Marketplace Fairness Act (MFA). CCIA has long opposed such legislation as burdening online vendors with the task of sorting through the policies of thousands of taxing authorities around the country, and serving as revenue collection agencies for each of them.

The RTPA retains the MFA’s framework of destination sourcing, with online vendors being asked to take on the collection burden to make it possible. While destination sourcing can be done for brick & mortar stores, who only need to collect taxes for the jurisdiction in which they are located, the customer of an online vendor could potentially be located in any one of the almost 10,000 tax jurisdictions around the country. This enormous compliance burden is the real-world consequence of attempting to tax two fundamentally different business models under the same system. Expecting the online sales side to shoulder that entire burden does not sound much like parity. Is such a solution worth the price of enabling states to project their taxing and auditing authority beyond their borders into other states?

In addition, one aspect of the RTPA’s small business exemption seems to be highly problematic. According to the bill, a remote seller is not eligible for the small business exemption if it “utilizes an electronic marketplace for the purpose of making products or services available for sale to the public.” Online marketplaces are a highly effective way for small online vendors to reach a broad universe of customers. It is puzzling that the RTPA would penalize and discourage their use by excluding them from exemption.

CCIA agrees with Chairman Goodlatte’s focus on maintaining the link between physical presence and taxation, and we look forward to further discussion of alternative approaches such as the Chairman’s draft Online Sales Simplification Act.

 

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