NH congressional delegation opposes bid to have online businesses be tax collectors
Now that the U.S. Supreme Court has decided it won't rule on a New York state law requiring online retailers to collect sales taxes, the battle returns to Congress, where the New Hampshire delegation is united in efforts to block or at least amend legislation that would impose a similar tax mandate on all 50 states.
U.S. Sen. Kelly Ayotte, R-N.H., on Tuesday urged Republican House Speaker John Boehner to reject any attempt to bring the "Marketplace Fairness Act" to the House floor for consideration.
A day earlier, U.S. Sen. Jeanne Shaheen, D-N.H., called on House Judiciary Committee Chairman Bob Goodlatte, R-Va., to exempt businesses in states without a sales tax, if the House takes up the Senate-approved legislation.
If the act becomes law, it would force Internet merchants to collect sales taxes on online purchases and send them to the sales-tax state where the buyer resides. New Hampshire consumers would not be directly affected, but online businesses in the Granite State would have to begin collecting sales taxes for hundreds of taxing jurisdictions nationwide.
"As the House Judiciary Committee considers legislation to regulate sales tax collection on this important sector of our economy, I write to call your attention to the importance of protecting these small businesses in New Hampshire and in other states that don't have a sales tax," Shaheen wrote in a letter to Goodlatte dated Dec. 2. "In particular, if your committee moves forward with online sales tax legislation, I urge you to exempt businesses in states without a sales tax."
The Senate passed the Marketplace Fairness Act in May by a lopsided 69-27 vote, without amendments proposed by Ayotte and Shaheen that would have exempted New Hampshire and the other four states without a sales tax.
The measure has stalled in the House, where the Republican majority appears reluctant to take up any measure that looks like a new tax before the mid-term elections. But the Supreme Court decision has emboldened supporters in the 45 states that have a sales tax, while raising concerns among opponents.
If measure comes to a House vote, Democratic Rep. Carol Shea Porter plans to offer an amendment that would exempt businesses in states that do not collect sales taxes from collecting a sales tax for other states.
The exemption is not the preferred solution, according to a congressional staffer who asked to remain anonymous. "The legislation, if enacted, opens the door to the expansion of other sales tax requirements," she said. "And even if there are exemptions for certain states, there's no guarantee future Congresses won't remove those exemptions. The bottom line is that we cannot allow this bill to become law, period. We don't want to make a horrible proposal moderately better; we want to kill it entirely."
Opening the door
The Supreme Court decision announced on Monday came as good news to many brick and mortar retailers who have fought for years to level the playing field with online vendors like Amazon and Overstock.com.
The two online powerhouses challenged a March ruling by the New York Court of Appeals that upheld the New York state law, citing the Commerce Clause of the Constitution, which limits the power of states to regulate interstate commerce.
They were hoping that a previous Supreme Court ruling would work in their favor. A 1992 decision gave states the ability to collect taxes from catalog purchases, but only if the business has a "brick and mortar" facility or "nexus" in the state.
The New York appeals court ruled that Amazon's relationship with third-party affiliates that receive commissions for sending Web traffic its way constituted a "substantial nexus." By allowing that standard to hold, the Supreme Court increased the likelihood that the Marketplace Fairness Act will withstand court challenges if it becomes law.
"The Supreme Court ruling opens the door for the states that have state or local sales taxes to pass laws demanding that out-of-state online retailers pay sales taxes for their residents," said Greg Moore, state director of Americans for Prosperity-New Hampshire, a conservative lobbying and policy group.
"This would turn New Hampshire businesses into the tax collectors for thousands of states, counties and local governments across the country and present a bewildering set of exemptions for each of these taxing authorities," he said. "Not only would this mean higher costs for people buying goods from New Hampshire online retailers, but it would add an enormous administrative burden on the backs of small businesses across the Granite State. This would be a huge blow to the New Hampshire Advantage of no sales tax."
Ironically, the Supreme Court decision to not hear the Amazon appeal was announced on Cyber Monday, the Monday after Thanksgiving.
Internet sales were 30 percent higher than for the same day last year, making Cyber Monday 2013 the biggest online shopping day ever, according to data released on Tuesday.