© The Financial Times Ltd 2014 FT and 'Financial Times' are trademarks of The Financial Times Ltd.
November 3, 2013 4:55 pm
A push by big US retailers to end tax-free internet shopping has been sidelined indefinitely in Washington because of opposition from conservatives and Republican leaders reluctant to tackle the issue ahead of elections next year.
The Senate passed a bill with bipartisan support in May that would have allowed states to begin collecting online sales tax, but that effort has stalled in the House of Representatives since last month’s government shutdown.
The bill addresses the most incendiary political issue in American retail: the complaint by bricks-and-mortar stores that online rivals gain an unfair advantage because they do not have to charge sales tax to many customers.
Conservatives, however, complain that the bill amounts to a new tax and would expand states’ authority by enabling them to collect tax via online businesses based in other jurisdictions.
Sales tax is levied at the state and local level and generally adds 5 to 10 per cent to prices for shoppers depending on their location.
Initially the proposal was seen as having a chance in the House, but the government shutdown and debacle over a rise in the US’s borrowing authority have helped to rob it of its momentum.
Republican leaders were hesitant to pursue any policy that could put members at risk in primary challenges ahead of next year’s midterm election, said Chris Krueger, an analyst at Guggenheim Securities.
On Capitol Hill, aides to legislators who back the bill said its prospects depended on Bob Goodlatte, chairman of the House committee with jurisdiction over the issue.
He has expressed reservations over the bill and has emphasised the need for it to simplify rather than complicate the US tax system. Mr Goodlatte comes from a solidly Republican district but could face a primary challenge if moved ahead with the legislation, though no candidate has emerged so far.
“The focus is on Chairman Goodlatte,” said one Senate aide.
The issue is already playing out in Senate races across the country. Lawmakers in South Carolina, Wyoming and Tennessee who supported the bill are coming under fire from candidates who opposed it.
It has become a focus of a challenge against Mike Enzi, a Republican senator from Wyoming, by Liz Cheney, the daughter of Dick Cheney, former vice-president.
Mr Goodlatte recently released a set of “principles” that he said should guide any legislative effort on the issue. “We’ve released the principles and continue to welcome ideas from interested parties,” said one aide on the House judiciary committee, which Mr Goodlatte chairs.
Another possibility is that Harry Reid, the Senate majority leader, could spur progress by adding the sales tax measure into another piece of legislation – such as a budget bill – that would get sent to the House.
A House aide said: “There’s a lot of gridlock on the House side so it’s not surprising there is gridlock over this issue. The Senate already passed the bill and it’s only a matter of time before there’s another attempt to send it to the House.”
Jason Brewer of the Retail Industry Leaders Association, a lobby group for them and others, said: “I think it’s absolutely foolish to conclude that congress will do nothing at all next year . . . Our issue is very well positioned.”
While bricks-and-mortar stores have focused their ire on Amazon, the internet retailer is now on their side as a supporter of the bill because it would stop states from singling Amazon out from online peers as a target for tax collection.
Ebay and Overstock have led opposition to the bill from the internet sector. An internet lobbyist said: “The thing is on hold till there’s a new version of the legislation that addresses the concerns being expressed by conservatives.”
Copyright The Financial Times Limited 2014. You may share using our article tools.
Please don't cut articles from FT.com and redistribute by email or post to the web.