Bill on Sales Tax for Internet Purchases Divides Republicans

Bill on Sales Tax for Internet Purchases Divides Republicans

WASHINGTON – Legislation that would force Internet retailers to collect sales taxes from their customers has put antitax and small-government activists like Grover Norquist’s Americans for Tax Reform and the Heritage Foundation in an unusual position: they’re losing.

For years, conservative Republican lawmakers have been influenced heavily by the antitax activists in Washington, who have dictated outcomes and become the arbiters of what is and is not a tax increase. But on the question of Internet taxation, their voices have begun to be drowned out by the pleas of struggling retailers back home who complain that their online competitors enjoy an unfair price advantage.

Representative Scott Rigell, Republican of Virginia, calls them “the hardworking men and women who have mortgaged their homes to buy or to rent a little brick-and-mortar shop.”

And each time Mr. Norquist and others in the antitax lobby take a loss, they start to seem more vulnerable, Republican lawmakers acknowledge, with ramifications for the continuing fights on the deficit and the shape of the tax code.

“I have a lot of constituents saying to me, ‘Grover Norquist did not elect you,’ ” said Representative Steve Womack, Republican of Arkansas and the author of the Internet tax bill in the House. “Members that come to Washington and kowtow to special interests end up contributing to this very polarized government. These are tough decisions we have to make up here.”

The legislation cleared its final procedural hurdle Thursday evening on a bipartisan Senate vote, 63 to 30. Final Senate passage is scheduled for May 6, and that tally is likely to be even more strongly in favor. Earlier test votes won as many as 75 yeses. And House action, once seemingly unthinkable, may be unstoppable.

“I have some concern about the legislation,” said Representative Bob Goodlatte of Virginia, chairman of the House Judiciary Committee, which has jurisdiction on the issue, “but we also recognize the fairness issue ? certain items being taxed in certain circumstances, other items being not ? is a problem for brick-and-mortar businesses, so we’re going to try and solve that.”

The Marketplace Fairness Act would allow state governments to force Internet retailers to collect sales taxes from their customers and remit the proceeds to state and local governments, just as brick-and-mortar retailers have done for decades. The states would be required to provide free software that would be embedded in retail Web sites to do the calculations.

Mr. Norquist, whose organization maintains the antitax pledge that virtually every Republican in Washington has signed, calls it the “Let People in Alabama Loot People in New York Act.” To him, the bill is a money grab by cash-poor state and local governments that would get the power to tax consumers who do not have the power to vote them out of office.

“It reduces the pressure on governments to offer the best services at the lowest cost,” he said in an interview. “We think it’s a very, very bad idea.”

His group has suggested that a yes would violate the taxpayers’ pledge, although Mr. Norquist has been cautious about whether passage of the law would constitute a tax increase, since consumers are already supposed to pay sales taxes even if a merchant does not collect it.

The Heritage Foundation and its more overt political arm, Heritage Action, have made no such equivocations. It is making a yes vote a black mark for a lawmaker on Heritage’s conservative scorecard, urging its members to call their representatives and senators, “pretty much everything we can,” said Dan Holler, a spokesman for Heritage Action.

Many Republicans have just shrugged. Supporters of the bill include Tea Party conservatives like Senator Ron Johnson, Republican of Wisconsin, and Republican leaders like Senator John Thune of South Dakota. They argue that the bill, which could generate as much as $24 billion in new tax revenues, is not a tax increase at all. It only ensures that taxes already owed are actually paid. Most states collect 4 to 7 percent on retail purchases.

“It’s obviously an issue that can be divisive for Republicans because a lot of the antitax groups are weighing in against it,” Senator Thune said. “But in states like mine where you’ve got a lot of smaller retailers trying to compete in smaller communities, people are going to do their business online, and that has grown dramatically over the last few years.”

The real pull has come from personal experiences back home, and the emergence of reliable Republican business voices who have provided a rare counterargument to the activists in Washington.

A version of this article appeared in print on April 29, 2013, on page A1 of the New York edition with the headline: Push to Require Online Sales Tax Divides the G.O.P..

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