Little Movement Seen in E-commerce Sales Tax Debate, eBay Exec Says

There has been little movement in the debate over the Marketplace Fairness Act (HR-684, S-336) since it failed to pass the Senate in December, eBay Senior Director of Global Public Policy Brian Bieron told us. The Senate had rejected including the bill’s provisions as an amendment to the 2013 Defense Authorization Act. The bill would allow state governments to collect sales taxes when an in-state resident makes an online purchase from an out-of-state retailer. “It seems like the same people who were for [the bill] before are for it now, the same people who had objections to it before have objections to it now,” Bieron said. “It seems to be pretty much the same debate it’s been for some time now, only louder.” The bill effectively gives states a “new power” to tax people outside their own borders, he said during an Information Technology & Innovation Foundation event Tuesday. EBay has been an active opponent of the Marketplace Fairness Act -- the company organized a gathering of small business owners on Capitol Hill earlier this month to voice their concerns about the bill.

EBay opposes the Marketplace Fairness Act because the legislation would hurt small businesses, Bieron said during the event. The bill includes a $1 million small-seller exemption, but eBay believes that threshold is too low, he said. More than 99 percent of all e-commerce sellers would be exempt from the bill’s requirements under the $1 million threshold, said Joe Crosby, a principal at MultiState Associates. The Marketplace Fairness Act has bipartisan support, he said. The bill’s House version has 25 Democratic and 22 Republican cosponsors; the Senate version has 20 Democratic or Democratic-caucusing and 5 Republican cosponsors.

The Permanent Internet Tax Freedom Act of 2013 (HR-434, S-31) is likely to pass, Annabelle Canning, a partner at Capitol Tax Partners, told us. The bill, introduced in February, would indefinitely extend the Internet Tax Freedom Act, popularly referred to as the Internet Tax Moratorium, which prevents state and local governments from taxing Internet access services and prevents duplicative or discriminatory taxes on e-commerce (CD Feb 1 p11). The moratorium was originally enacted in 1998; the current extension, passed in 2007, is set to expire Nov. 1, 2014, Canning said during the event. “I think Internet access remains a very high priority in a very bipartisan way to make sure everybody has access,” she told us after the event. There has been a consensus opinion that the moratorium should be extended until communications-related taxes were simplified -- something that has yet to fully occur, Canning said. “Because of that, you really need another moratorium in place,” she said. “I think people don’t want to see the level of taxation that happened with wireless."

The separate Wireless Tax Fairness Act would institute a five-year “timeout” on discriminatory taxes on wireless services, said Jot Carpenter, CTIA vice president-government affairs. Taxes on wireless services are often far higher than a state’s sales tax, he said, saying Nebraska has a 19 percent combined state and local tax on wireless services. Washington State’s combined rate is 18.6 percent; New York’s is nearly 17.9 percent, while Florida’s is 16.5 percent, Carpenter said. If wireless services were taxed at the same rate as a state’s sales tax, CTIA “wouldn’t complain,” he said. The Wireless Tax Fairness Act passed a unanimous voice vote in the House in 2011, but died after the Senate failed to act on it; the bill will reappear in April or May, Carpenter said.

The Digital Goods and Services Tax Fairness Act will also reappear soon, said NetChoice Executive Director Steve DelBianco. The bill, which also failed to pass in the last Congress, would prevent states from imposing “discriminatory” taxes on digital goods that exceed the sales tax on its physical equivalent, DelBianco said. In other words, the tax on digital audio sales could not exceed the tax on a CD, he said. The bill would limit the collection of an e-commerce sales tax to the state where the purchase was made, and would also clarify that only a state legislature can impose new taxes on digital goods and services, DelBianco said.