(CNSNews.com) – Republicans in the Senate are leading efforts to pass legislation that would allow the states to impose a sales tax on online transactions.
Sen. Mike Enzi (R-WY) has proposed the Marketplace Fairness Act (MFA), which would allow states to "collect and remit sales and use taxes with respect to remote sales.” The bill includes an exemption for companies whose gross remote sales are less than $1 million per year.
The legislation enjoys support particularly among legislators in rural states who believe that online retailers are encroaching on sales made out of traditional storefronts.
CNBC reported Friday that the market value of shares of online retailer Amazon has now surpassed those of Wal-Mart, the nation's largest brick-and-mortar retailer.
The National Retail Federation (NRF) claims that states could collect an additional $25 billion in sales taxes annually if the legislation is passed, and argues that imposing the tax would help to promote business at traditional stores, create jobs, and provide tax revenue.
“The billions of dollars in lost sales tax is revenue badly needed by cash-strapped state and local governments to pay the salaries of essential workers such as police officers, firefighters, ambulance crews, and schoolteachers,” the NRF states.
But Andrew Moylan, executive director and senior fellow at the non-partisan, free-market R Street Institute, argues that the legislation would just make the tax code even more burdensome and onerous for businesses.
“The Marketplace Fairness Act and other similar bills allow states to tax outside their borders, add tremendous complexity to tax compliance, and establish a different and more burdensome tax collection standard for Internet retail than already exists for brick-and-mortar,” Moylan told CNSNews.com.
“If passed, it would encourage states to continue targeting out-of-state entities for taxation while harming millions of online businesses and consumers.”
This is not the first time Enzi has pushed for an online sales tax. In 2014, he was able to pass the bill in the Senate by combining it with another bill called the Internet Tax Freedom Act (ITFA). Conservatives supported ITFA because it prohibited taxes from being imposed on Internet access service.
However, the package never reached the floor of the House for a vote.
While Enzi’s bill stands to pass the Senate with bipartisan support again this year, it still faces strong opposition from conservatives.
A number of conservative organizations -- including the Competitive Enterprise Institute, the Heartland Institute, the R Street Institute, and Americans for Tax Reform -- all oppose the legislation. That means it will face a more difficult road to passage in the House.
As a result, it may again be added as an amendment to a different piece of legislation that would prevent taxes from being imposed on Internet service, which could create a conundrum for legislators deciding how to vote.
Speaking at the Hudson Institute on Monday, Sen. Deb Fischer (R-NE) said there was a possibility that senators would try the same maneuver again this year in order to “save time,” though she also said that combining the bills was not her preference.
Fischer, though not a co-sponsor of Enzi’s Internet sales tax bill, has consistently supported efforts to pass online sales tax legislation.
"I think it's always good to have stand-alone bills so you can address an issue," Fischer said. “When you start throwing things in and have Christmas tree bills, you may be able to garner more votes, but it makes it... more difficult to justify your votes.”
Christmas tree bills are those that attract a number of amendments that may not relate closely to the bill’s main purpose, but that do provide benefits to different groups or special interests.
“That being said, there’s only a limited amount of time that the Senate has to do things,” Fischer continued. “In the House it seems like they just pass all sorts of stuff,” she said, whereas in the Senate, “it takes about eight days for a bill to get through.
“So the most precious thing we have in the Senate is time, and any time that bills are delayed or you’ve seen – I like to call them bumps in the road in trying to work together on bills - you’ve used up that precious time. Which means if you’re really going to get action done on a lot of these issues, you have to put them together,” she concluded.
But Moylan disagreed with Fischer’s assessment, saying the legislation had already received enough favorable breaks from parliamentary procedure. He suggested that the real reason for passing it as an amendment was to avoid a direct vote by Congress.
“The Marketplace Fairness Act has never been subject to the normal committee and amendment process and remains a very controversial piece of legislation,” Moylan pointed out. “Attaching it to the widely supported no-brainer that is the Internet Tax Freedom Act would be a transparent attempt to shield MFA from real legislative scrutiny.”