Womack pushing for Internet tax bill

His party gives him the most grief

U.S. Rep. Steve Womack (shown) said he wrote his bill, the Marketplace Equity Act, in response to the rapid growth of Internet sales. It would give the states authority to collect sales taxes from online retailers.
U.S. Rep. Steve Womack (shown) said he wrote his bill, the Marketplace Equity Act, in response to the rapid growth of Internet sales. It would give the states authority to collect sales taxes from online retailers.

— With time running out and its chances dwindling, U.S. Rep. Steve Womack, the sponsor of an Internet tax bill in the House, got some encouragement from Sen. Mike Enzi, who has sponsored similarly stalled legislation in the Senate.

In a Capitol Hill room Wednesday, shortly before the two members of Congress updated a group of state legislators about their failed efforts, Enzi walked over to Womack and told him, “Thanks for being willing to be a target. I’ve been working on this since I got here, and I’d really like to be able to finish it up.”

In his remarks, Womack, a Republican from Arkansas, explained why he has a bull’s-eye on his back. He doesn’t get much push-back from Democrats on the issue, he said, but his fellow Republicans have given him grief because he’s trying to force people to pay taxes they’ve always owed on Internet purchases but that the retailers haven’t collected and remitted to the states. “It’s not a new tax,” Womack said. “It’s a due tax.”

Womack argued that state sales taxes are on the books in 46 states.

In the 1992 Quill Corp. v. North Dakota case, the U.S. Supreme Court ruled that it would be too heavy a burden to force retailers to collect taxes in states where the businesses don’t have a physical presence. Instead, the burden is on the purchasers of goods, who are supposed to pay the taxes to their states in good faith.

Womack said he wrote his bill, the Marketplace Equity Act, in response to the rapid growth of Internet sales. It would give the states authority to collect sales taxes from online retailers.

The bill exempts small businesses from having to collect the tax on out-of-state sales.

Nationally, states have lost $34.4 billion in uncollected sales-tax revenue this year, up from $22 billion in 2007, according to the National Conference of State Legislatures.

Bentonville retail giant Wal-Mart Stores Inc. and other retailers that have brick-and mortar stores collect taxes on sales at those stores and remit the money to the states where those stores are located.

Online competitors who aren’t required to collect taxes have an unfair advantage, critics say.

Womack, whose Northwest Arkansas district includes Wal-Mart’s headquarters, said opposition to his bill within his party is formidable. This summer, for instance, Grover Norquist, founder of Americans for Tax Reform, an influential anti-tax group in Washington, called the bill “unacceptable.”

Norquist is the promoter of a popular “no new taxes” pledge that scores of Republican politicians have signed.

To get Republican votes for his bill, Womack said, he has stressed “states rights” and the concept that the bill enhances free enterprise.

“You have to be able to create for them [lawmakers] certain types of cover,” he said.

Womack and Enzi both said they hoped to pass the bill over the next two weeks before the congressional session ends. But with an uncertain schedule and a limited number of bills expected to be put to a vote in each chamber, a final vote is uncertain.

Days ago, Enzi dropped plans to add an amendment to a broad defense bill that would have enforced tax collections on items sold on the Internet. He insisted that he had enough votes to pull it off but said he didn’t push the amendment because it was not related to the defense legislation.

Rex Allen of Russellville sells amateur astronomy equipment and rocketry kits on his website, telescopemart.com. He said his annual sales of less than $1 million would make him exempt from collecting sales tax, if Womack’s bill were to pass.

But, he said, he opposes the measure on principle.

“If California thinks they need a piece of me just because I shipped a box there, that’s just wrong,” he said.

Allen is part of a coalition of businesses called NetChoice that opposes Womack’s legislation.

Steven DelBianco, Net-Choice’s executive director, criticized the bill because it would not require states to standardize and simplify their tax codes. Each Internet business would have to report its sales to the 46 states and 9,600 local taxing jurisdictions, which have a hodgepodge of tax rates and product definitions.

“Is a granola bar candy or food,” a classification that determines how it is taxed, DelBianco asked. “Each state does it differently.”

DelBianco said Wal-Mart is a key proponent of the tax bills. He said the company would like to gain a competitive advantage on online retailers, most notably Amazon.

“Wal-Mart’s main goal is to force Amazon to collect taxes everywhere,” he said. “That’s not a justification for imposing a complex and extreme burden upon thousands of businesses across the company.”

A Wal-Mart representative referred calls to Danny Diaz, who is a spokesman for Alliance for Main Street Fairness, a consortium of retailers that includes Wal-Mart, Home Depot, Target and Best Buy.

Diaz said the Internet tax “helps brick-and-mortar retailers across the board - big and small.”

“It’s not a question of whether this will become law,” he said, “it’s a question of when.”

The split on the issue is reflected throughout the business community. Todd Pack,a spokesman for the National Federation of Independent Business, said his group has not taken a position on the legislation.

“We have members who think Internet businesses have to pay - that there should be a tax,” he said. “We have members who don’t. Our members are divided on this.”

Arkansas state Sen. Joyce Elliott and more than 100 state legislators from around the country were in Washington on Thursday and Friday to push members of Congress to pass the legislation.

Citing figures from the National Conference of State Legislatures, Elliott, a Democrat, said Arkansas lost out on $114 million in uncollected Internet taxes this year.

“Originally, it seemed like a minor issue,” Elliot said. “We’re at a point now that this is a sleeping giant.”

Front Section, Pages 1 on 12/10/2012

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