Listening to U.S. Rep. Steve Womack, R-Rogers, tell it, the issue of Internet taxation is not an issue of raising revenue. Instead, he says it is an issue of fairness.
That is what he said was the purpose of his Marketplace Fairness Act (S. 743 / H.R. 684), co-sponsored with U.S. Rep. Jackie Speier, D-California,, that he has sponsored in the House and recently passed through the Senate.
"This is the job of the U.S. Congress. When people recognize the problem in tax policy is that it's weighted for online retailers, our job is to find a solution," he said.
The bill that passed the Senate is "basically the same bill" as what will now have to snake through the House, Womack said.
NOT A NEW TAX
While Womack's legislation is intended to level the playing field by pushing online retailers to collect taxes on purchases made on the web, he said the bill itself does not raise taxes at all.
"If this bill passes, it has no affect on people whatsoever until a state takes action," he said. "It doesn't raise any revenue, it doesn't raise a red penny. It just empowers the states to collect the taxes that are due that have been legally implemented."
Sen. Jake Files, R-Fort Smith, sought to solve the problem of internet tax collection through the passage of SB 738 in 2011. The law closed a loophole in tax law and required online retailers to collect and remit taxes.
Files said Wednesday (May 8) that Womack was "right on this issue" and his bill would empower states to enforce the laws already on the books. But he said the challenge was not only in getting passage of laws related to Internet sales tax, but educating the public about the issue.
"In Arkansas, there were a lot of misconceptions. I had calls and 98 people out 100 (after explaining the law) agreed with me," Files said, adding that many were unaware that a use tax was owed by individuals for purchases made online.
He said the bill he introduced and successfully saw through to passage was revenue neutral, meaning there would be no impact on the state's budget due to the legislation even with retailers collecting sales taxes online if the retailer had a physical presence or an affiliate in the state.
And while the bill championed by Files may not have made a major impact in revenue during the last two years, Womack said it is important that Congress act now to protect brick-and-mortar retailers who have become "glorified showrooms" and also protect the tax base of communities across Arkansas.
"Most cities and counties have local option sales taxes which means they tax the people who shop in their communities, in some cases to enhance law enforcement or street and drainage work," he said. "In the case of Springdale, Ark., their sales tax was dedicated to Arvest Ballpark. The more people that choose not to shop at the store in Springdale or wherever and choose to do that shopping online are denying those cities and counties an opportunity to improve their quality of life."
Files echoed Womack's statement, adding that his 2011 bill and Womack's bill today are both about protecting a tax base, but also about protecting Main Street.
"It became about those businesses that were unfairly penalized because they had a brick-and-mortar and had to charge tax. When it became about that story, it was less about the money and more about fairness."
In the short two years since passage of Arkansas' law, some retailers have come out in favor of Womack's bill even though they opposed Files' bill. One of the largest retailers to change course is Amazon.com, which pulled its affiliate program in the state of Arkansas shortly after passage of Files' bill.
Files said he was not surprised by Amazon's actions from 2011 to today.
"I think at the time that we pushed for the law in Arkansas, there were probably five other states that had (a similar law). My guess is Amazon pushed against it early on, thinking if they could defeat laws state by state and the push to go national would be less. Once they saw it happening in more states, they saw the writing on the wall," Files said, later adding that he thought the company could "see the reality of a level playing field. They now want to be a player and not an antagonist to the whole game."
The next challenge in this long process is getting Womack's bill through the House. He said the bill will go through the House Judiciary Committee and is already meeting opposition within his own party.
"I'm under no illusion that it could have the same success in the House as the Senate," Womack said. "What I'm advocating for is a never-ending quest to address objections of members. I think it's important to put (the bill) through the committee process to amend (it) so when it comes out of the House, we've done our best to address the objections of people."
One of those who has spoken against the bill in its present form is Speaker of the House John Boehner, R-Ohio. The Speaker believes there is a problem with Internet taxation but does not like Womack's proposed solution, Womack said.
"What I'm trying to do is offer up a solution. If the solution in its present form is not acceptable, let's work together to find what is acceptable,” Womack explained.