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Retailers hawking goods online would have to collect sales tax for the location where their products are shipped under legislation proposed by a Utah congressman.
Rep. Jason Chaffetz said Friday he wants to level the playing field between online merchants and brick-and-mortar stores, while curbing the patchwork of laws now governing Internet sales.
Chaffetz this week introduced the Remote Transactions Parity Act, backed by a group of bipartisan House members, in what the Utah Republican argues could be the answer to the long-standing question of how to deal with taxing Internet purchases.
Similar legislation has been floated for years but failed to garner enough support to pass Congress. Chaffetz said the time is right for action.
"The political climate is such that we have to get something done because of the lawsuits that are happening across the country," Chaffetz told The Salt Lake Tribune editorial board Friday.
Merchants selling products online now have to collect sales tax only if they have a physical location such as a store or warehouse within the state where the purchase is made. Otherwise, Americans are expected to voluntarily pay taxes from online purchases with their annual income-tax filings, a provision that analysts estimate costs government billions in lost revenue.
State Sen. Wayne Harper, R-Taylorsville, said Utah loses $80 million to $120 million in taxes from online sales each year. But he noted that if Chaffetz's legislation were to pass, Utah lawmakers would work to lower the sales tax rate to ensure a "net zero" impact in revenue the state receives.
Harper, who sits on the Streamlined Sales Tax Governing Board, said Chaffetz's bill wouldn't burden small businesses because free software would be available to handle the tax collection. Chaffetz's legislation would phase in the law for businesses, exempting those with annual sales of less than $10 million for one year and those with less than $5 million in sales for two years.
The push for collecting online sales tax from merchants faces stiff opposition from conservative groups, including Americans for Prosperity, Americans for Tax Reform and FreedomWorks, that see the legislation as adding a new tax for consumers.
"Ultimately, the Remote Transactions Parity Act would be a nightmare," warned the National Taxpayers Union, "requiring consumers to pay hundreds of billions of dollars in additional sales tax while imposing unprecedented compliance burdens on small online merchants."
Chaffetz said that the tax is already in place even if taxpayers aren't paying it.
"It's a tax that's already due," he said, "so to suggest that it's a new tax is not true."
A previous incarnation of the bill was sent to the House Judiciary Committee, whose chairman, Rep. Bob Goodlatte, R-Va., has competing legislation that splits the taxes differently between the business location and the point of sale. Chaffetz's bill is expected to hit Goodlatte's committee as well.