Washington Report

Keeping Members Informed About Regulatory Issues

Contents
July 2000

CATALOG ISSUES UPDATE

UPDATE ON USE TAX COLLECTION

Although there are not many new developments in the Congress on efforts to expand the duty of remote sellers to collect state sales and use taxes, a short update could be useful. On May 10, 2000, the House of Representatives passed H.R. 2709, the Internet Nondiscrimination Act by a vote of 372-75. The bill extends the current moratorium on Internet access taxes and multiple and discriminatory taxes for five years. The bill is currently pending in the Senate, where it can be considered at any time. After the House passed H.R. 2709, the House Judiciary Committee held two hearings on the issue of sales and use tax collection by remote sellers. Neither the Committee nor the full House will consider any legislation on this issue this year.

The Senate situation is far different from the House. The Senate has voted on the issue of sales and use tax collection by remote sellers a couple of times. There are a number of powerful, knowledgeable, and vocal Senators who strongly oppose our position and want the Quill protections reversed. One of our most outspoken opponents, Senator Dorgan (D-ND), introduced S. 2775 on June 21, 2000. The bill provides for a four-year extension of the existing moratorium, calls for state sales tax simplification, and authorizes states to force remote sellers to collect once they achieve simplification and join a compact of at least 20 states. The bill would provide collection authority automatically unless Congress disapproves the simplification compact authorized in the bill. Most of our adversaries support the Dorgan approach; however, the National Conference of State Legislators refuses to endorse the legislation because they do not want Congress dictating how they structure their sales and use tax systems.

The DMA has been working with a coalition of companies and trade associations assembled by the staffs of Senators McCain (R-AZ) and Wyden (D-OR). Our initial efforts were directed at trying to get Senator McCain's bill to extend the moratorium through the Senate Commerce Committee. This effort has been thwarted thus far by Senators who want to address the sales and use tax collection issue now. Senator Wyden decided to draft a bill that would resemble Senator Dorgan's bill as much as possible, but would change the most egregious provisions. This draft legislation fixes most of the problems in the Dorgan bill, but it is not perfect. for remote sales. We are working to alter other simplification provisions that fall short of what we believe are necessary for the states to achieve meaningful simplification. Senator Wyden has not introduced his draft legislation yet because we are still working on it, and there have been discussions among the three Senators on a possible compromise. Fortunately, it appears that Senators McCain and Wyden are adamantly opposed to permitting states to force collection unless the Congress affirmatively authorizes such collection after all the simplification has supposedly taken place.

Meanwhile, efforts to simply extend the moratorium or limit taxation of the Internet are available and may pop up any time. During consideration of the legislation to relieve the marriage penalty tax, Senator Smith (R-NH) wanted to offer an amendment to ban taxes on the Internet. This effort was stopped, not by our adversaries, but by one of our chief alliesSSenator McCainS because he believes the matter is within the Commerce Committee's jurisdiction, and the Committee still has time to address the issues. Senator Smith will continue to search for other legislative options for his amendment.

Congress has gone into recess until September 6th. This leaves approximately one month for Congress to complete its work on the appropriations bills, election year tax cuts, and the rest of its unfinished work. It is unlikely, although not impossible, that the Senate will be able to forge a compromise on these very tough issues and find the time to consider it, and then have a Conference with the House to work out any differences between the House and Senate versions of the legislation.

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