It’s time to modernize rules on e-commerce

Two bills affecting what consumers pay to use the Internet are tangled up in Congress. And, as usual, the prognosis for a speedy resolution isn’t good.

One bill – a renewal of the 1998 Internet Tax Freedom Act (ITFA), which expires Nov. 1 -- would extend or make permanent the prohibition of state and local government taxes on Internet access. The U.S. House voted in July to make the ban on taxing Internet access permanent. But the U.S. Senate prefers a temporary extension.

The other bill – the Marketplace Fairness Act (MFA) – is new legislation passed by the U.S. Senate in 2013. It allows states to require out-of-state retailers to collect sales tax on online purchases made from their jurisdictions. The U.S. House has yet to consider the bill. Meanwhile, some states are ordering retailers to collect sales tax and that has led to numerous lawsuits.

It sounds confusing, because it is.

But the bottom line is this: If Congress can’t agree and does nothing by the Nov. 1 deadline, consumers will pay as much as an additional $100 per year to access the Internet.

Gov. Jay Inslee is throwing his support behind a new effort by a bipartisan group of senators to combine the two bills. This is the right approach. The Marketplace & Internet Tax Fairness Act (MITFA) would allow states to collect sales tax from online purchases and extend for 10 years the prohibition on state and local Internet access taxes.

For more than 20 years, online retailers have enjoyed nearly a 10 percent price advantage over local brick-and-mortar stores. This unfair tax treatment has hurt small main street businesses, who have found it difficult to compete with Internet powerhouses on price.

And state and local government have lost sales tax revenue due to them.

If the U.S. House is serious about supporting small businesses and creating jobs, they would pass the Marketplace & Internet Tax Fairness Act without hesitation. It’s a common-sense measure designed to close an unintended multi-billion-dollar tax loophole for big Internet retailers.

The House version of the senate-passed MITFA has some Republican sponsors, and might pass if it got a floor vote. The question is whether GOP leadership and tea party right-wingers will allow a vote.

If Congress fails to act by the Nov. 1 deadline, it will be another defeat of good policy for political purposes.

The explosion of Internet commerce is a classic example of technology moving faster than government’s ability to regulate it for the common good. Allowing a fringe group of federal legislators to slow that process further only makes matters worse.

As Inslee says in a letter urging the Washington state congressional delegation to pass MITFA, the bill is a long over-due policy change to modernize rules on e-commerce. And return fairness to the retail marketplace.