Posted By Vicki McClure Davidson on April 23, 2013
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Pres. Barack Obama endorses the Internet sales tax that is being rushed through the Democrat-controlled Senate. The disaster this could cause for small online businesses, forced to collect taxes from customers across the country who live in states with no sales tax or with varying sales taxes, could decimate, even destroy online commerce. Additionally, many argue that it would be taxation without representation and could lead to financial transaction taxes.
Majority leader Harry Reid is pushing through this complicated ?Marketplace Fairness Act of 2013? Internet sales tax bill, giving little time for senators to thoroughly read it. They had the bill in hand less than a week, but the motion to proceed passed with an overwhelming majority last night, 74-20, for it to go to a floor vote, perhaps as early as today. A hefty number of Republicans in the Senate voted for it, as they did last month before it was ultimately shot down by the House.
While I understand the arguments made by brick-and-mortar businesses about sales tax and the ?unfair? advantage the lack of it may or may not give to online stores, that isn?t the entire picture. The federal government sees an opportunity for billion more taxpayer dollars to spend and is trying once again to power-grab the Internet. It?s important to remember that in 1992 the U.S. Supreme Court ruled in Quill v. North Dakota that an individual state has no power to directly tax or compel tax collection of citizens of other states, that a taxpayer must have a physical presence in a state in order to require collection of sales or use tax for purchases made by in-state customers.
From the Washington Bureau Business Journals, Internet sales taxes sailing through Senate, but House may be another story:
Sales taxes on Internet purchases grew one step closer to becoming a reality Monday evening when the Marketplace Fairness Act easily cleared a Senate procedural hurdle by a 74-20 margin.
Final passage is expected later this week. The legislation would allow states that simplify their sales tax systems to collect taxes on purchases made by their residents from online businesses based in other states. Under current law, retailers have to collect sales taxes only for states where they have a physical presence.
Bricks-and-mortar retailers say legislation is needed because tax-free Internet sales give online retailers an unfair advantage. State and local governments, meanwhile, are hungry for the estimated $22 billion in additional tax revenue they would get if online sales were taxed.
That powerful combination of interests is helping the Marketplace Fairness Act sail through the Senate, but the bill will have a harder time in the House.
Four reasons are listed ? click here for the detailed reasons.
Not all Democrats in the Senate were on board for the Internet sales tax ? last week, Sen. Ron Wyden (D-OR) taped this compelling call to action to stop online sales tax and protect Internet freedom.
Sen. Ron Wyden: ?Yes? to Innovation and ?No? to Online Sales Tax
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From The Wall Street Journal, The Internet Sales Tax Rush:
Every time Congress has taken a serious look at proposals to boost Internet sales taxes, it has rejected them. That?s probably why pro-tax Senators are trying to rush through an online tax hike with as little consideration as possible.
As early as Monday, the Senate will vote on a bill that was introduced only last Tuesday. The text of this legislation, which would fundamentally change interstate commerce, only became available on the Library of Congress website over the weekend. And you thought ObamaCare was jammed through Nancy Pelosi?s Democratic House in a hurry.
For Senators curious about what they?re voting on, it is the same flawed proposal that Mike Enzi (R., Wyo.) introduced in February. It has been repackaged to qualify for a Senate rule that allows Majority Leader Harry Reid to bypass committee debate and bring it straight to the floor.
Mr. Enzi?s Marketplace Fairness Act discriminates against Internet-based businesses by imposing burdens that it does not apply to brick-and-mortar companies. For the first time, online merchants would be forced to collect sales taxes for all of America?s estimated 9,600 state and local taxing authorities.
New Hampshire, for example, has no sales tax, but a Granite State Web merchant would be forced to collect and remit sales taxes to all the governments that do. Small online sellers will therefore have to comply with tax laws created by distant governments in which they have no representation, and in places where they consume no local services.
Meanwhile, New Hampshire?s brick-and-mortar retailers will bear no such burden. They will not be required to collect taxes on the many customers who drive across the Maine and Massachusetts borders to shop in New Hampshire. Bill sponsors say it would be too big a hassle to force traditional retailers to ask every walk-in customer where they live, but these Senators are happy to impose new obligations online.
The Enzi plan would require a centralized tax collector for each state or for a group of states that would gather both state and local levies from the online merchants. His office concedes that could still mean 27 or more different auditors of a Web-based business?which is better than 9,600 but hardly qualifies as simplicity.
Daniel Horowitz addresses more concerns in a post last month at RedState ? The Marketplace Fairness Act is More Unfair Than Status Quo:
Some conservatives who are pushing a federally-mandated internet tax claim to be bothered by a question of free market fairness. After all, isn?t the current sales tax system tendentious and beneficial to online retailers who could offer the same products to consumers as brick and mortar stores without having to charge sales tax?
Let?s first acknowledge that far from crushing mom and pop shops, the internet has actually leveled the playing field for them. The internet has allowed smaller businesses to compete everywhere, even if they lack the capital necessary to build a national network of wholesalers, distributors, and retailers like the Walmarts of the world. As for collecting taxes, there is no good way of collecting e-commerce sales taxes across state lines without growing government, creating even worse market distortions, and hurting low-tax red states.
The solution that is being pushed by companies like Walmart, revenue-hungry governors, and those who claim to be concerned about the free market, is the Marketplace Fairness Act (S.336/H.R. 684). Yes, that?s a real conservative sounding name. The bill would essentially allow states to join together to force online retailers to collect sales taxes on behalf of all 50 states based on the location of the shipping address.
To the extent that the status quo gives an advantage to online vendors, the MFA would overcorrect the problem and hurt online vendors. While brick and mortar stores are forced to collect taxes from everyone, they are only subject to the tax of their home state. So if they are located in a state with no sales tax or a low tax they collect the lower tax, even if the customer is from a high tax state. Under the MFA, online vendors in a state like New Hampshire would still have to collect the high rate of taxes of customers from California. So red-state companies will have to serve as tax collector for high-taxed blue states, thereby obviating the benefit of being in a red state and blurring the effectiveness of laboratories of democracy.
Moreover, why would we want to encumber online businesses with the technicalities of establishing a tax collection system that would satisfy nearly 10,000 unique tax jurisdictions in this country? Hence, whereas under the current system brick and mortar businesses have to collect more in taxes, under the MFA online vendors in red states would pay even more, plus they would incur the cost of the new regulatory burden of complying with the myriad of tax codes. That is a recipe for killing jobs and raising the cost of goods. It?s for good reason that the Quill decision referred to such a scheme as a ?burden? and violation of due process.
In fact, collection, enforcement, and reciprocity of this tax would be so complicated that it would engender yet another fix in the endless cycle of government incompetence. The only way to effectively collect it would be with a uniform national sales tax. There is no question in my mind that the MFA would be the easiest way for liberals to leverage their much sought-after national sales tax ? an entirely new revenue stream.
This was posted at Breitbart?s Big Government last year:
Of note is the fact that states represented or formerly represented by supporters of the bill such as Florida, Nevada, Tennessee and Wyoming are among those with no income tax, where there is a strong argument against emboldening income tax introduction proponents.
If the Marketplace Fairness Act passes, will you be paying more on your online purchases? That depends.
First, residents of Kansas, Kentucky, New York, North Dakota, Texas and Washington already pay tax on Amazon purchases (and that list is set to increase because of agreements reached between Amazon and some other states), while customers of Overstock.com who live in Utah already pay sales tax on goods they buy through the retailer.
Meanwhile, in California, some business owners have already been required by state officials to report and pay sales tax on online purchases made through the likes of Amazon.
Given the Golden State?s overall approach to taxes and regulation, it seems plausible that when taxes are required to be collected and remitted by the retailer directly, other taxes will not be reduced commensurately? and so for those in very blue, very liberal states, skeptics say, an effective tax hike could apply.
This is how the Japanese view the Internet sales tax debate, from NMA TV:
Online shopping? You may need to pay online sales tax
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