Senators Bob Goodlatte and Max Baucus remain focused on other pressing issues. | AP Photos A taxing battle on Internet sales

The longtime backers of a state Internet tax fix think they can overcome strong congressional currents in a year dominated by debates over how much the feds raise and spend.

But a few key players remain lukewarm at best about the legislation — and the politics of the moment suggest the bill is barely keeping its head above water.


Even after multiple rewrites, it’s likely to be a tough battle for the Marketplace Fairness Act, a bipartisan proposal that could help states ensure they’re receiving their sales-tax dues when residents purchase products from out-of-state online retailers.

House Judiciary Committee Chairman Bob Goodlatte (R-Va.) isn’t supporting the measure in its current form, while the leader of the Senate Finance Committee, Sen. Max Baucus (D-Mont.), is focused almost exclusively on the more intractable fights to come over the federal Tax Code.

Moreover, it could be tough to hitch the bill onto other fast-moving, politically charged packages — especially in the face of anti-tax conservatives like Grover Norquist who are out proselytizing on Capitol Hill that the proposal is a new tax, not an enforcement issue.

Still, supporters stress they can keep their efforts afloat. “We need to fix the problem; it’s a loophole that’s getting bigger and bigger and bigger,” said Rep. Steve Womack (R-Ark.), a key sponsor of the House version of the bill.

To allies, the Marketplace Fairness Act aims to correct a discrepancy in the law that has deprived states of more than $20 billion in revenue each year. That’s why supporters emphasize they’re not angling for a new tax. Rather, they note, some states’ online shoppers are supposed to remit fees on their Web purchases every year, but many buyers aren’t aware of the rules or choose not to abide by them.

After failing repeatedly to enact a law in the previous Congress, sponsors retooled the Marketplace Fairness Act to address some industry criticism and, in the process, harmonized the disparate House and Senate versions of the proposal. The new bill exempts a larger category of small businesses from any tax, and it gives states more wiggle room to implement new rules and determine the means of collection.

However, some key lawmakers in both chambers and parties aren’t exactly rushing to support the new work product.

For one thing, the bill must clear the House Judiciary Committee before it can reach the chamber floor through regular order — and Goodlatte isn’t a fan of the latest draft.

“I do not believe legislation like the Marketplace Fairness Act is sufficiently simplified yet. While it attempts to make tax collection simpler, it still has a long way to go,” the lawmaker told POLITICO in a statement.

“There is still not uniformity on definitions and tax rates, so businesses would still be forced to wade through potentially hundreds of tax rates and a host of different tax codes and definitions,” Goodlatte continued. “There is also concern that despite disclaimers the bill could open the door for states to tax or even regulate beyond their borders.”

But the Virginia Republican didn’t close the door on future online sales tax legislation. “I am open to considering legislation concerning this topic, but these issues, along with others, would certainly have to be addressed,” he said.

Supporters did manage to solicit the backing of Rep. Spencer Bachus (R-Ala.), who signed onto the bill last week. A spokesman for the lawmaker, who leads the Judiciary subcommittee that may get first crack at the bill, said Bachus is “aware of the frustrations the states” experience on the issue.

There’s a similar battle on the horizon in the Senate, where the measure may remain dormant until Congress commences the fight over comprehensive federal tax reform, a process that could take more than a year to complete, if it happens at all.

When Sen. Dick Durbin (D-Ill.) offered an earlier version of the Marketplace Fairness Act as an amendment to the defense bill last December, Senate leadership later asked him to pull it. In exchange, the majority whip was told it would be among the pieces of legislation taken up in 2013 by the Senate Finance Committee.

But an aide to the Senate Finance Committee said the bill’s complexities — for example, how states with varying tax laws would enforce it — makes it a prime candidate for future tax reform debates.

“This type of issue is exactly the reason Chairman Baucus is holding regular, bipartisan meetings on tax reform this spring — to get input from the committee on a range of options, lay the foundation and move forward together,” the staffer told POLITICO.

A more immediate route to passage might be through the Senate’s continuing resolution, though the chamber’s backers haven’t yet introduced the Marketplace Fairness Act as an amendment. Indeed, none of the bill’s co-sponsors has publicly said this is the next step — though a spokeswoman for Durbin told POLITICO they aren’t going to “rule anything out.”

Even by that route, however, it would be a tough political sell, particularly to the most conservative wings of the Senate. The chamber is already struggling, in fact, to cobble together a finite list of amendments to be offered during the coming budget debate, Majority Leader Harry Reid (D-Nev.) said Monday. And should the Senate muster 60 votes, there’s no telling whether House Republicans would step outside the contours of regular order just to advance the tax fix. Goodlatte, at least, wouldn’t support that approach, given its complexity, a Judiciary aide told POLITICO.

For now, Durbin has said he rejects that notion that Congress should wait for tax reform to act on the measure. He argued that online sales tax is not a tax issue but an enforcement fix.

“This is separate,” Durbin said of including the measure in comprehensive tax reform. “Even though the tax word is involved in it, it strictly involves state and local tax revenues. It has nothing to do with federal tax revenue.”

But not everyone shares that view. Even Womack, at a POLITICO event last week, acknowledged the “political reality is you may have to stick it in comprehensive reform.”

In the meantime, the political opposition is gathering steam. Norquist has already labeled the bill an unconstitutional new tax — and, as a result, off-limits for signers of his Taxpayer Protection Pledge. A collection of other conservative groups — including the Competitive Enterprise Institute and National Taxpayers Union — even wrote members of Congress last week to warn them off the bill, which they said would cause “serious damage to electronic and interstate commerce.”

Not every conservative, however, is steadfastly opposed to the legislation. A number of top Republican governors — a list that includes New Jersey Gov. Chris Christie — have even inked deals with Amazon, which backs the bill, to collect sales tax in anticipation of a new federal law.

At the very least, that’s fodder for supporters, who signaled this month they’re ready to go to the mat back in Washington. “It is not a new tax, and I think Mr. Norquist knows that,” Womack told POLITICO last month. “As much as he would like to make this a part of his no-tax pledge, which I signed, that’s simply an incorrect and somewhat convenient assumption to make. The tax is due. It is just that the consumers are making an individual choice to not pay it.”