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Washington insiders say the bill, drafted by House Judiciary Committee Chairman Bob Goodlatte, addresses weaknesses in prior tax bills and eases e-retailers’ burden of collection and remittance.

Washington is poised to take another stab at the online sales tax issue, which has been batted about in Congress and at the state level for years.

A discussion draft of the Online Sales Tax Simplification Act of 2016 by House Judiciary Committee Chairman Bob Goodlatte, R-Va., is being widely distributed today and is expected to be introduced in Congress soon.

See the complete draft of the Online Sales Tax Simplification Act of 2016 here.

The draft proposes a more streamlined system to determine the sales tax to be collected and would allow e-retailers to remit the collected monies to their home state revenue office in the same manner they already remit taxes collected on in-state sales.

A key e-retailer objection to prior online sales tax bills was the burden they would put on the merchant to figure out what to tax and at what rate, as there are thousands of tax jurisdictions in the country, and not every jurisdiction taxes all products. The soon-to-be proposed bill says merchants will follow the rules of their home state as to what products are taxable—information and formulas e-retailers would already have in place for in-state sales—and then merchants will collect tax at a flat rate set by the state of the customer. That means there would be 46 tax rates—45 states and the District of Columbia have a state sales tax; five states do not have a state sales tax.

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E-retailers would remit the collected taxes to their state revenue office, which would then turn the out-of-state money over to a clearinghouse for distribution to the states. E-retailers would have to report how much was collected for each state to their state revenue office. Under terms of the bill, states cannot audit out-of-state sellers over these funds.

It is up to the states to determine whether they want to participate. States set their own tax rate. The bill says the rate cannot be higher than the state sales tax, plus a weighted average on a tax rate already in place at the local level.

“The elegant simplicity of this approach for analog and online sellers is that they will now treat all their customers as if they strode up to the front door and made a purchase,” says Steve DelBianco, executive director of NetChoice. The only difference would be that the e-retailer charges the shopper tax at the single rate determined by the consumer’s home state. NetChoice is a group that represents e-retailers and has actively participated in developing the bill’s key points.

There are no exceptions for small sellers in the Online Sales Tax Simplification Act of 2016. This is in contrast to previous failed bills, which offered some accommodation for small e-retailers. The Marketplace Fairness Act, which passed the Senate in May 2013 before dying in the House, exempted companies that have $1 million or less in remote sales within the United States. The Remote Transactions Parity Act (RTPA) proposed exempting in the first year retailers with less than $10 million in U.S. online sales, then in the second year the act would have lowered the exemption to $5 million, and then to sellers with less than $1 million in web sales in the third year. However, the RTPA also said any seller who sells through an online marketplace—such as through eBay Inc.’s or Amazon.com Inc.’s marketplaces—would be required to collect sales tax right away.

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DelBianco says terms of the draft bill are “so simple there is no need for an exemption” for smaller sellers.

An aide for the House Judiciary committee says the draft is designed to “level the playing field” for traditional retailers while keeping compliance simple for online sellers so states can get the sales taxes they are due.

Consumers are legally obligated to pay sales tax to their home state when they purchase online, but few pay it if the retailer doesn’t collect it at checkout. That, and the growing amount of money being spent online, has propelled a number of states to enact legislation and file lawsuits to make e-retailers pay up.

South Dakota and Alabama are openly challenging prevailing federal law that requires online and catalog retailers to collect sales tax only in states where they have a physical presence, also known as nexus, such as an office or warehouse. That law was enacted in 1992, when the web and online retailing was nascent.

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“The states took matters into their own hands and have launched a campaign of harassment against remote retailers,” DelBianco says. “This is driving businesses to go to Congress for a national solution.”

The National Retail Federation, a trade group for retailers, says it welcomes the bill. “We hope this move will bring the attention needed to get Congress to move forward in treating purchases made online the same as those made in local stores when it comes to sales tax collection,” says David French, senior vice president for government relations. “With online shopping increasing every day, it’s time for Congress to act.”

For a full report on the online sales tax debate see the upcoming October 2016 issue of Internet Retailer magazine.

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