🔒Will Congress finally tackle the online sales tax conundrum?

With Maine lawmakers in recess until a new Legislature is elected and convenes in January, it seems like a good time to look south to see what might be brewing in the nation's capital that Maine businesses should keep a close eye on.

Here's an ambitious initiative that already is getting lots of attention from both brick-and-mortar and e-commerce retailers: It's called the Online Sales Tax Simplification Act of 2016.

U.S. Rep. Robert Goodlatte, a Virginia Republican who serves as chairman of the House Judiciary Committee, released the draft legislation on Aug. 25 — saying he's hoping it will break a years-long deadlock in Congress on the challenging issue of creating a fair system of collecting online sales taxes.

The issue dates back to a 1992 U.S. Supreme Court ruling that online sellers can only be required to collect sales tax in states where they have a physical presence, such as stores, offices, warehouses or their headquarters. The court held that it was too complicated for an online seller in one state to know how much tax to collect from a buyer in other state due to the complexity of sales tax laws in those states that collect them, and essentially gave them a free pass on collecting sales taxes from customers in states where they don't have a physical presence.

Various forms of online sales tax legislation have been introduced in Congress over the past 15 years without winning passage.

With the rapid growth of online e-commerce retailers, the National Retail Federation estimates $25 billion in sales taxes are going uncollected each year. The NRF, which is the world's largest retail trade association, also notes that Main Street brick-and-mortar stores are facing increased competition from large out-of-state online sellers who undercut them on pricing because of their high volume, low overhead and exemption from collecting sales tax for customers in states where they don't have a physical presence.

Goodlatte's draft legislation, according to NRF, seeks to level the playing field for sales tax collection by having online merchants follow the rules of their home state as to what products are taxable and then collecting tax at a flat rate set by the state of the customer. Five states do not have a state sales tax: Alaska, Montana, New Hampshire, Delaware and Oregon.

“We hope this move will bring the attention needed to get Congress to move forward in treating purchase made online the same as those made in local stores when it comes to sales tax collection,” David French, NRF senior vice president for government relations, said in a written statement about Goodlatte's draft legislation. “With online shopping increasing every day, it's time for Congress to act. The price advantage held by online sellers when they don't have to collect sails tax has resulted in the shuttering of bricks-and-mortar retail stores in almost every community across the nation over the last few years. That cannot be allowed to continue.”

In a whitepaper on sales tax fairness, the NRF stated that Main Street retailers are seeing increased evidence that customers are buying online to avoid paying state or local sales taxes — for example, the practice of “showrooming,” in which consumers come into their stores to look at merchandise and use smartphone apps to scan product bar codes to see where the item can be purchased online, thereby avoiding the sales tax.

“The disparity in sales tax rules undermines not only Main Street retailers but also the communities they support,” the NRF policy whitepaper states. “The billions of dollars in lost sales tax is revenue badly needed by cash-strapped state and local governments to pay the salaries of essential workers such as police officers, firefighters, ambulance crews and school teachers.”

Stay tuned.