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State Lawmakers Strongly Oppose Proposed Online Sales Tax Bill


 Federal internet sales tax legislation?

 

The National Conference of State Legislatures (NCSL) is very much in favor of a federal solution to untaxed remote sales. However, the organization strongly opposes the Online Sales Simplification Act of 2015 (OSSA), which Rep. Bob Goodlatte (R-VA) and Rep. Anna Eshoo (D-CA) distributed to members of the House Judiciary Committee earlier this month.

After “eventually receiving the Online Sales Tax Simplification Act proposal through a third party source,” Senator Debbie Smith (D-NV) and Senator Curt Bramble (R-UT) have written a letter to House Speaker John Boehner on behalf of the NCSL to “express our continued disappointment and frustration with the House Judiciary Committee regarding the consideration of legislation to collect state sales taxes on remote transactions.” The Online Sales Simplification Act of 2015 is, the letter claims, “unclear, unconstitutional, riddled with loopholes, and would allow the federal government to dictate state policy.”

 

OSSA differs from the Marketplace Fairness Act of 2013 (MFA), which was approved by the Senate in May 2013 and then all but ignored by the House Judiciary Committee. Under MFA, states that simplify sales tax administration would have the right to impose a sales tax obligation on businesses making a minimum amount of sales in the state. The rate of tax collected would be based on the location of the buyer--destination sourcing.

The Online Sales Simplification Act proposes origin sourcing, meaning the rate of sales tax would be based on the location of the seller. NCSL has this to say about that:

“Adding insult to injury, the Chairman’s discussion draft adopts Hybrid-Origin Sourcing (HOS), which not only imposes new taxes on consumers in non-sales tax states, it raises taxes on consumers who purchase products from higher sales tax states. We also believe it tramples upon the 10th Amendment as it preempts state sovereignty to levy taxes on its own residents, establishes a new sub-national entity to govern the collection of remote sales taxes, and codifies for the first time, “taxation without representation.” We also believe that this new sub-national entity violates the Compact Clause of the Constitution. We find this disingenuous proposal offensive and believe that it validates the unwillingness of the Chairman to work in good faith with states to solve an ever-growing problem.”

For his part, Goodlatte says OSSA is a “starting point” for the discussion of remote sales tax.

Read the NCSL letter to Speaker Boehner.

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Sales tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
Gail Cole
Avalara Author
Gail Cole
Gail Cole
Avalara Author Gail Cole
Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.