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Retailers call bill blocking online sales tax 'opposite direction of fairness' for local stores

"Government should not favor remote sales over sales made in a bricks-and-mortar store."

NRF SVP David French

WASHINGTON – The National Retail Federation today asked a House committee to reject a bill that would block states from requiring that online sellers collect sales tax, saying the measure is the reverse of what Congress should be doing.

“As online sales become a larger percentage of total retail sales, it is imperative that policymakers recognize that … government should not favor remote sales over sales made in a bricks-and-mortar store,” NRF Senior Vice President for Government Relations David French said.

“H.R. 2887 would exacerbate the current discrimination against local bricks-and-mortar retailers and lead to a further decline of Main Street retailers,” French said. “”H.R. 2887 goes in the opposite direction of fairness.”

French’s comments came in a letter sent to members of the House Judiciary Committee, which is holding a subcommittee hearing this morning on the No Regulation Without Representation Act, sponsored by Representative James Sensenbrenner, R-Wis.

The Sensenbrenner bill would bar states from requiring that out-of-state online sellers collect sales tax on sales made to their residents. The bill would effectively write into law a 1992 U.S. Supreme Court ruling that said sellers can only be required to collect sales tax in states where they have a physical presence such as a store, office or warehouse.

The measure is the opposite of a series of bills introduced in Congress over the past 15 years that would allow states to require online sellers to collect sales tax the same as local stores regardless of whether they have a physical presence. NRF urged that the committee hold a hearing on the current House version of those bills, the Remote Transactions Parity Act, sponsored by Representative Kristi Noem, R-S.D.

“This legislation provides parity at the point of sale, so essential to the need of Main Street America,” French said. He noted that the bill also requires states that want to participate to simplify their sales tax laws and offers audit protection sought by smaller retailers.

A similar measure, the Marketplace Fairness Act, is pending in the Senate, where it passed in 2013 before stalling in the House. NRF has argued that online sellers who don’t collect sales tax have an unfair price advantage over local stores that do.

The Sensenbrenner bill appears to be an attempt to lock the Supreme Court ruling into place before the court can have a chance to change its mind. In 2015, Justice Anthony Kennedy said the justices made a mistake in 1992 by relying on an out-of-date precedent on physical presence, and he invited opponents of the ruling to bring a new case that would allow the court to reconsider the issue. Eleven states asked the court to do so in a case submitted late last year, and the justices could be asked later this year to take up another case currently making its way through the courts.

NRF is the world’s largest retail trade association, representing discount and department stores, home goods and specialty stores, Main Street merchants, grocers, wholesalers, chain restaurants and Internet retailers from the United States and more than 45 countries. Retail is the nation’s largest private sector employer, supporting one in four U.S. jobs – 42 million working Americans. Contributing $2.6 trillion to annual GDP, retail is a daily barometer for the nation’s economy. NRF.com