You often hear the adage “the devil’s in the details.” A prime example is occurring on Capitol Hill right now.
There’s a very good chance that inaction by Congress will result in a 45 percent gas tax increase for Virginia drivers come January. And right in the middle of that is Rep. Bob Goodlatte, R-Roanoke County.
He’s holding up House action on a bipartisan Senate bill that would impose state sales taxes on e-commerce purchases. If that doesn’t pass Congress by Jan. 1, Virginia’s gas taxes will automatically increase. At current prices, that translates into roughly a nickel a gallon.
As a précis, allow me to define three categories of retail businesses. They are “bricks-and-mortar,” such as Davidsons on Jefferson Street and Northwest Hardware, which has five locations in the Roanoke Valley; “brick-and-click,” generally national chains that have stores or warehouses in Virginia as well as an online business (like Walmart); and online-only retailers.
The first two categories collect and remit the 5.3 percent tax on their sales in Virginia. Online retailers who have no physical presence in the state have no such obligation. And that puts local merchants and national chains, both which have higher overhead, at a competitive disadvantage.
Back in 2013, Congress began efforts to eliminate e-retailers’ advantage via the Marketplace Fairness Act. It would require e-retailers with annual revenues of $1 million or more to collect and remit state sales taxes to the states where their customers live.
At that time, the Virginia General Assembly was hashing out its 2013 transportation funding bill. State lawmakers assumed Congress would pass the federal act before Jan. 1, 2015, which would bring hundreds of millions in previously uncollected revenue into Richmond.
So Virginia lawmakers designated a portion of the anticipated revenue from the federal law to the state transportation trust fund. There also was a caveat that if Congress didn’t enact the Marketplace Fairness Act by Jan. 1, 2015, Virginia’s wholesale gas tax would increase from 3.5 percent to 5.1 percent. That simply gets passed along to drivers.
Marketplace Fairness passed the Senate in May 2013 with 69 votes, including 21 from Republicans. And it’s been stalled ever since in the House Judiciary Committee where Goodlatte is the chairman. He’s also co-chair of the Congressional Internet Caucus.
Two outspoken proponents of Marketplace Fairness are Larry Davidson, owner of Davidsons, and Charley Overstreet, owner of Northwest Hardware. Both have personally and repeatedly urged Goodlatte to get moving on the bill.
“A lot of people don’t like taxes — I don’t like taxes either. But there isn’t such a thing as a free highway,” Davidson told me. “The logic here is that it’s time to level that playing field for everybody. It’ll hold taxes and fees down in other areas of the state.”
“I’m a Republican,” Overstreet said. “I’m not a Democrat. But the Republicans are the ones holding up the law.” At a recent luncheon of the Roanoke Kiwanis Club, Overstreet personally asked Goodlatte about the issue.
“At first he was against it,” Overstreet told me. “Now he says he’s trying to make it more fair. … The big excuse from the Internet sales people is, it’s a nightmare to enforce it. But all it is is a software program. The software already exists.”
They aren’t the only ones in favor of the bill. Chambers of commerce and other business groups in Roanoke, Salem, Lynchburg, Lexington, Harrisonburg, Staunton and Amherst and Highland counties are on the record for Marketplace Fairness.
So are the governing bodies of Roanoke, Harrisonburg and Vinton, and Allegheny, Amherst and Roanoke counties.
The Virginia Chamber of Commerce supports it and so do the Virginia Retail Federation and the Virginia Retail Merchants Association.
Last week, I posed some questions about this to Goodlatte, through his press secretary, and here was his answer:
“Many Members of the House of Representatives have serious concerns regarding the Marketplace Fairness Act and do not believe this legislation is the answer. Only 10 of the 39 members of the House Judiciary Committee have co-sponsored the Marketplace Fairness Act.
“With this in mind, the Committee is working on an alternative approach to the Internet sales tax issue and continues to work with all stakeholders on that effort. Any online sales tax system must be simple enough for every business to use and fair, so that all businesses — whether online, brick-and-mortar, or brick-and-click — are on equal footing.
“In the meantime, any concerns regarding the increase in the state’s gas tax have to be addressed by the Virginia General Assembly. The General Assembly, which has jurisdiction over state tax policy, passed the increase in the gas tax and so any changes to that legislation must come from Richmond and not Washington.”
Two circumstances fuel a bit of cynicism here. One, echoed by Overstreet, is that sales taxes on e-commerce are going to happen sooner or later. But with Congress on a two-month break right now, it looks like it won’t be before Jan. 1.
That would mean “we’re going to have the [Virginia] gas tax increase and we’re going to have the sales tax increase, too,” Overstreet noted.
The other concerns $611,000 in donations by computer/Internet interests to Goodlatte’s campaigns since 1991, according to Opensecrets.org. Of that, $147,000 came in the 2013-14 election cycle. The only industry that’s been more generous is Hollywood.
“Knowing the source of funding for so much of his campaigns, I guess there’s no doubt he’s got some obligations there,” Davidson told me.
All of the above is enough to make you wonder: On this issue, who’s Goodlatte listening to? His constituents in the Shenandoah Valley? Or his contributors from Silicon Valley?
Either way, better get ready for that nickel-a-gallon gas tax increase come January.