Congress Takes Action On Opposing Internet Bills

By Christine Kern, contributing writer

Senate Pushing Controversial Sales Tax Legislation

With the long-time moratorium on Internet access tax set to expire in November, the U.S. Senate and the House recently took action on bills to extend it. The Senate attached its bill to controversial separate legislation requiring more online retailers to collect sales tax, however.

While both Republicans and Democrats in Congress support the extension of the ban on Internet access tax, a more controversial proposal that would let states force more online retailers to collect sales on e-commerce transactions has become intertwined in the extension of the Internet access tax moratorium.

On July 15, the Republican-dominated House passed with bipartisan support on July 15 the Permanent Internet Tax Freedom Act, which would permanently extend the ban on taxes applied against the fees Internet service providers charge. The ban applies to 43 of the 50 states, excluding Hawaii, Ohio, New Mexico, North Dakota, South Dakota, Texas and Wisconsin, which have had Internet access tax laws since before the Internet Tax Freedom Act was passed in 1998.

Also on July 15, a bipartisan group of members of the Democratic-led Senate, introduced the Marketplace and Internet Tax Fairness Act, designed to extend the ban on Internet access tax for 10 years, until November 2024. However, the new Senate bill combines that extension with the provisions of the Senate-passed Marketplace Fairness Act, which would grant states the power to force online and catalog retailers with at least $1 million in sales outside their home states to collect sales tax from online shoppers nationwide.

The access tax bill doesn’t affect sales tax, but key senators say they will try to attach sales tax legislation to it before sending it back to the House as the deadline approaches.

“Why wouldn’t we?” Senator Michael Enzi, R-Wyo., told reporters. “They’re a perfect fit.”

The Marketplace Fairness Act will die when the current two-year session of Congress ends in January if not signed into law by then.

NRF urged the two chambers of Congress to work together and pass sales tax legislation before that can happen, contending that that the ban on Internet access taxes will support continued free use of the Internet, while the online sales tax measure will “level the playing field” among retail chains that must collect sales tax on their online sales and web-only retailers who don’t have to collect sales tax.

“The retail industry has rapidly evolved over the last two decades with e-commerce,” NRF Senior Vice President for Government Relations David French said. “It is time for Congress to eliminate the sales tax disparity.”

But NetChoice, an organization that represents web-only merchants and other Internet companies, contends that the new Senate bill is trying to tie what NetChoice considers a good law—the ban on Internet access tax—with what it says is a flawed Marketplace Fairness Act. Among other problems with that legislation, NetChoice executive director Steve DelBianco says,  supporters of this week’s Senate bill “are seeking to derail the deliberative process by sabotaging a highly productive House debate about how to collect remote sales tax without creating unfair burdens for Internet sellers.”

Proponents of the Senate’s bill this week, however, say that combining legislation on Internet access tax and online sales tax is a valid way to prod the House into action on the online sales tax measure. Indeed, in January the Marketplace Fairness Coalition, a group representing some 300 retailers and retail trade associations, called on the House Judiciary Committee to speed up its review of the Senate’s Marketplace Fairness Act, which the committee has been reviewing since shortly after the Senate approved the online sales tax bill by a vote of 69-27 in May 2013.