The Ferguson Group Blog

Online Sales Tax Collection: The House Principles

When the Senate passed the Marketplace Fairness Act in May by a vote of 69 to 27, a major point of contention was language exempting some small businesses from collecting sales tax on out-of-state transactions. The legislation said businesses with more than $1 million in annual revenue would have to collect tax for online transactions. Now the House of Representative is getting ready to take up its own Internet sales tax legislation.

Last week, the House Judiciary Committee released Basic Principles on Remote Sales Tax outlining concerns and priorities for a bill that would allow online retailers to collect sales tax. The Committee received input from taxpayers, industry groups, and representatives of state and local governments to develop these seven basic principles. Chairman Bob Goodlatte (R-Va.) developed the principles to promote public debate on the issue with hopes that it will create innovative solutions.

The “Basic Principles on Remote Sales Tax” are:

1. Tax Relief – Using the Internet should not create new or discriminatory taxes not faced in the offline world. Nor should any fresh precedent be created for other areas of interstate taxation by States.

2. Tech Neutrality – Brick & Mortar, Exclusively Online, and Brick & Click businesses should all be on equal footing. The sales tax compliance burden on online Internet sellers should not be less, but neither should it be greater than that on similarly situated offline businesses.

3. No Regulation Without Representation – Those who would bear state taxation, regulation and compliance burdens should have direct recourse to protest unfair, unwise or discriminatory rates and enforcement.

4. Simplicity – Governments should not stifle businesses by shifting onerous compliance requirements onto them; laws should be so simple and compliance so inexpensive and reliable as to render a small business exemption unnecessary.

 5. Tax Competition – Governments should be encouraged to compete with one another to keep tax rates low and American businesses should not be disadvantaged vis-a-vis their foreign competitors.

6. States' Rights – States should be sovereign within their physical boundaries. In addition, the federal government should not mandate that States impose any sales tax compliance burdens.

7. Privacy Rights – Sensitive customer data must be protected.

 

Online Sales Tax Collection: The Very Latest on the Marketplace Fairness Act

With the Senate having passed legislation earlier this session that will require retailers to collect and remit taxes to states from internet sales, and the House due to consider the same, polling and lobbying on the topic are ramping up.

Last week The American Institute of Certified Public Accountants (AICPA), without taking a position on the legislation,  urged lawmakers to exempt more retailers from collecting tax in order to help those retailers to comply with the potential new mandate. The AICPA  conveyed this in a Sept. 10 letter to the chairmen and ranking members of the House Ways and Means Committee, the Senate Finance Committee and the Judiciary committees of both chambers.

On the heels of that letter, a poll was released on Friday  by the Marketplace Fairness Coalition, which supports the legislation, showing 53 percent of voters  favor of the bill and 37 percent oppose. Their poll was released a day after the National Taxpayers Union and the R Street Institute, which oppose the legislation, released a poll showing that respondents opposed changes in tax policy like those in the Marketplace Fairness Act by 57 percent to 35 percent.

Don’t Mess with Muni Bonds Tax Status Say National Water Associations

The National Association of Clean Water Agencies (NACWA) and the Association of the Metropolitan Water Agencies (AMWA) jointly issued a report showing the benefits of tax-exempt status for municipal bonds.  The groups analysis shows that ending or capping the tax-exempt status would directly result in increased costs for providing water and wastewater services to people and businesses.   The report, The Impacts of Altering Tax-Exempt Municipal Bond Financing on Public Drinking Water & Wastewater Systems, concludes that a proposed major change in over 100 years of federal tax policy would shift water and wastewater costs onto residents and businesses and NOT investors, as some of the idea’s proponents suggest.

Earlier this year, the White House issued a 2014 budget proposal that would impose a 28 percent benefit cap on tax-exempt municipal bond interest for high-income taxpayers.  The report shows that, based on the volume of bonds issued in the previous year (slightly over $39 billion for 2012), state and local governments would have had to pay $6 billion in additional expenses for water and wastewater infrastructure projects.  All but two states issued municipal bonds in 2012 to help finance needed infrastructure projects.   Had the cap been in place then, there would have been an astronomical number of projects not undertaken, fewer jobs created and sustained and less service to residents. 

The report is available on the NACWA and AMWA websites at www.nacwa.org or www.amwa.net.

 

Online Sales Tax Collection is Good Business

There is more news today in support of state and local collection of online sales tax.  According to a study released today by Arthur Laffer, who served as a member of President Ronald Reagan’s Economic Policy Advisory Board, leveling the playing field and giving states the ability to collect sales tax from out-of-state online retailers could create 1.5 million new jobs.  “Excluding e-commerce sales or a myriad of other exclusions adopted by so many states inefficiently narrows the sales tax base and creates economic distortions by taxing similar economic activities differently,” he wrote.

After a decade of stop-and-go progress on passage of the Marketplace Fairness Act, the Senate voted in May on legislation granting states the power to collect sales tax from online retailers, with the bill clearing the Senate with 69 votes. Now it is the House’s turn to begin consideration of the bill.  Representative Bob Goodlatte, Chairman of the House Judiciary Committee,  has promised to hold a hearing on the legislation but it has not yet been scheduled.  The bill also enjoys the support of the White House.

“Blank Slate” Tax Reform Threatens Muni Bond Tax Exemption: Contact Your Senators!

Late last week, Senate Finance Committee Chairman Max Baucus and Ranking Member Orrin Hatch circulated  a letter to fellow Senators on their proposed “blank slate” plan, essentially a tax reform proposal that would start over with a "blank slate" by eliminating all tax breaks and lowering tax rates for both individuals and corporations alike. In doing so, so the draft “blank slate” proposal would eliminate the exclusion for municipal bond interest.

Chairman Baucus and Ranking Member Hatch have asked Senators to submit proposals to them on what provisions they would like to see added to this draft tax code, so Senators would have to convince Chairman Baucus and Ranking Member Hatch to add the municipal bond exclusion (or any other exclusion or deduction) back. If this or any other proposal to eliminate the exemption for municipal bonds is enacted,  it would significantly drive up state and local borrowing costs for infrastructure projects.  A recent report shows that if this exemption had been fully eliminated, in the past decade it would have cost local governments $495 billion and stalled essential infrastructure projects.

Take a few minutes to reach out to your Senators and  encourage them to urge the retention of the current law for exclusion of municipal bond interest.

Folks are Talking...

And they’re talking about the tax exempt status of municipal bonds.  The past few months have seen well-organized and active opposition to the elimination of the tax exempt status of municipal bonds, but apparently the threat has not been eliminated.  We got a hold off an internal Senate Finance Committee white paper prepared by Committee staff this week that details tax reform options that Finance Committee members may wish to consider as they work towards reforming our nation’s tax system.  Unfortunately the paper includes options to limit, replace, or repeal the current-law exclusion for municipal bond interest.

This means that we must keep up the pressure on Congress, let them know that you are deeply opposed to any limitation on the tax exempt status on municipal bonds, and if your Senator is a Member of the Senate Finance Committee, your outreach is particularly vital.  

Internet Tax Bill Takes a Step Forward

After a decade of stop-and-go progress on passage of the Marketplace Fairness Act, the Senate voted today on legislation granting states the power to collect sales tax from online retailers, clearing the Senate with 70 votes. Now it is the House’s turn to begin consideration of the bill.

With only 65 co-sponsors and a House Judiciary Chairman, Bob Goodlatte, who has reservations about it but has vowed to hold a hearing on the bill,  proponents in the House have an uphill battle.

Wednesday News Roundup

Every Wednesday, The Ferguson Group blog will be posting a series of articles published over the previous week that discuss topics of interest to local governments. Learn about emerging trends and keep up on key policy issues by browsing the TFG Wednesday News Roundup!

Senate Moves Ahead on Online Sales Tax-But Would it Help or Handicap Small Businesses?

As the Senate moves to a vote on the Marketplace Fairness Act, some small business supporters say that online merchants will face the colossal issue of dealing with the nearly 9,600 different state and local taxing jurisdictions.  Small businesses with less than $1 million in annual revenue will be exempt; however, there is still much debate about how much burden a business can handle and if the $1 million mark is too low.  Read More…

White House Says Open to Legislation to Halt FAA Furloughs

On Tuesday, the White House announced it is open to looking at alternative ideas Congress may have to address the challenges sequester cuts have caused the Federal Aviation Administration (FAA) and American travelers.  Since furloughs at the FAA started Sunday, April 21, there are reports that the reduced staff has caused delays.  The FAA reported that on Monday alone, 1,200 of the 2,600 delays were attributed to the furloughs.  Read More…  

Dave Camp to Brief House Republicans on Tax Reform

This week, the House Ways and Means Committee Chairman Dave Camp (R-MI) will brief House Republicans on a draft bill his office has written proposing tax law changes for small business, Wall Street and international firms.  If this push is ultimately successful, it will be the first time Congress has rewritten the Tax Code in over 25 years.  Read More…

Congressional Immigration Debate Signals Big Shift

When Arizona became the first state to pass strict immigration laws three years ago, it created a firestorm of debate concerning border security and immigration policy.  Today, amidst the immigration bill discussion, we see that Congress has accepted some of the strict policies set by Arizona even if lawmakers are leaning the opposite way.  Read More…

Is Raising the Gas Tax Truly Politically Unpalatable?

At some point during FY 2015, the Congressional Budget Office estimates that the Highway Trust Fund (HTF) will run out of enough funds to meet its current obligations.  In order to sustain the HTF, one of the proposed resolutions is to raise or index the gas tax from the current 18.4 cents; a tax which has not been increased since 1993.  Some politicians believe raising this tax would be wildly unpopular, however, recent data shows the public may not be as opposed to the idea as some think.  Read More…   

Local Governments and Main Street Retailers see Progress in Senate Action

On Monday afternoon, the Senate approved a procedural motion that will allow the upper chamber to consider and vote on the Marketplace Fairness Act later this week.  This bill would allow state and local governments to enforce their sales and use tax laws on “remote sellers.”  These remote sellers include catalog and online retailers that do not have a physical presence in the state.  Right now, old U.S. Supreme Court case law prohibits state and local governments to enforce their sales and use tax laws because, at the time, the technology was not in place to make such collection and remittance possible without unduly burdening those remote sellers.  However, current technology has made it much easier to implement multijurisdictional tax laws.  States must first simplify their tax laws, and at least 24 already have.  Not only with this allow state and local governments to collect the $23 billion owed to them annually, but it will also level the playing field between remote and local retailers, as local retailers are required to collect and remit sales tax, and lose a lot of business to remote sellers.  As a consumer, I have mixed feelings about this legislation, but as a local government advocate, I see it for what it really is – fairness.

Affordable Care Act Provisions: What Federal, State, and Local Government Employers Need to Know

On April 30^th the Internal Revenue Service (IRS) will conduct a phone forum to discuss key provisions of the Affordable Health Care Act and the impact they will have on federal, state and local government employers, payroll and benefits administrators.

The 60 minute presentation will take place on April 30^th at 2:00 p.m. EST. The provisions covered during the presentation include the following:

• W-2 Reporting: Employer Sponsored Health Coverage
• Additional Medicare Tax on High Income Earners

• What is included in the cost of coverage (i.e. health, dental/vision, FSA benefits).  
• Additional Medicare Tax: application, calculation, and reporting.

Registrants will be given the opportunity to submit questions prior to the phone forum and can do so by emailing [email protected]. The subject line of the email should be “ACA Phone Forum.”

To register for the Affordable Care Act forum click here. Space is limited, so make sure you sign up early!