Monday, March 18, 2013

The Coming (Quiet) Push For A National Internet Sales Tax

by Matt Collins

There is a very quiet push to implement what is effectively a national sales tax scheme on all Internet purchases. They have already tried to sneak it into bill previously, and they will likely attempt to sneak it through again in the near future POTENTIALLY EVEN THIS WEEK. It is called the Marketplace Fairness / Main Street Fairness Act.

The legislation would seek to overturn a 1992 Supreme Court decision called Quill vs North Dakota which ruled that businesses who do not have a physical presence in a state cannot be forced to collect sales tax for that specific state government. Not only does the Quill decision protect online businesses from having to collect tax for all 50 states, it also prevents taxation without representation by prohibiting state governments from forcing their laws on business outside of its borders.

The Marketplace / Main Street Fairness Act would force each online retailer to create different pricing structures for every individual customer, a massive burden and significant increase in cost to doing business. These costs would of course be passed on to the customer, causing the price of all online purchases to increase in addition to the new taxes imposed as a result of this Act. These types of regulation would be stifling to online commerce and detrimental to the economy overall.

Mandating a national Internet sales tax collection scheme is focusing on the symptom instead of the actual problem. Politicians are attempting to raise revenue when they should be cutting spending since state tax revenues are back to pre-recession levels. The concept of a “revenue problem” is pure mythology. This mandate would be a “tax-and-spend” solution for many state governments that find themselves in fiscal hot water due to spending overruns.

The uglier and darker side to this issue is that larger businesses are lobbying the government to pass this scheme which would severely hurt their smaller competition. Barriers to entry on the Internet are miniscule and practically anyone can start an Internet retail presence for their home based business within a matter of minutes. However attempting to keep up with regulatory and taxation jurisdictions for 50 states is not easy, nor would it be functional for the vast majority of small Internet retailers.

More broadly, this issue is reflective of a bigger question, that of how much authority will the government hold during the Internet Age? Will states get to exercise power outside of their borders, or will there be an unlimited reach available to every government? Taxation without representation is always appealing to the politicians because they cannot be held accountable by the people they are taxing. We are at a fork in the road and can move forward with either more freedom, or move backwards with more government; Internet taxation is one of the first steps in deciding which direction we’ll take.

It should be noted that free market groups like Cato Institute, Competitive Enterprise Institute, Americans for Tax Reform, Nat’l Taxpayers Union, Heartland Institute, Heritage Foundation, Reason, and even eBay and the Direct Marketing Association are opposing this measure.

Republican elected officials who are joining Dick Durbin, Dianne Feinstein, and Al Franken to support this measure should know that recent polling shows almost half of Americans do not want an expansion of sales taxes on the Internet and 63% of conservatives are opposed to it. When the question is framed about states pushing their laws outside of their borders 61% of Americans oppose it and 77% of conservatives do too. In fact 84% of Republicans oppose any sort of expansion of governmental power over the Internet, especially taxation or regulation. It is likely that any Republican who supports this massive expanse of government power will see a primary challenge because of it.

Matt Collins is a Republican activist in Nashville.

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  1. "In fact 84% of Republicans oppose any sort of expansion of governmental power over the Internet, especially taxation or regulation."

    Unfortunately, 100% of our "conservative Republican" Senators and our "conservative Republican" Governor are all for it. TN Republican voters just sent Bailout Bob back for another 6 years at a 86% rate. TN Republicans didn't have a problem with his bailouts/cash4clunkers/gang of 10/GM takeover/Bernanke RE-confirmation/etc. and therefore provided more support rather than a primary challenger.

  2. Next they'll be trying to tax intestinal gas. These folks that want to tax everything are sooo

  3. Matt Collins, guest blogging on A Disgruntled Republican?

  4. We should expect mores taxes from the Party Lincoln. Lincoln created the IRS. Since its foundation the GOP has promoted more government and more taxes to pay for it. The GOP has always been anti freedom. If you love freedom and hate big government and more taxes run from the GOP. You are in an abussive relationnship. Get out of it. Put your energy into a party tat truly wants small government. And wants to abolish the IRS annd replace it with nothing.

  5. I suggest that all politicians being paid with taxpayer money be required to sign an employment contract. Breach of this contract would mean termination, without benefits et al and banning from doing business with the government forever. It seems that contract law is the only enforcable law we have left. This will replace a worthless ,unenforcable oath of office and allow the people to control their employees. Allowing these people to police themselves is not in the taxpayers best interest and needs to stop now!

  6. Taxation of internet sales is first and foremost an issue of fair competition, nothing more.

    Giant e-retailers have every advantage over local businesses thanks to the sale tax exemption of internet sales. That means Tennessee doesn't just lose sales tax revenues. We also lose small businesses and jobs and wages because Tennessee businesses are at a permanent disadvantage under current circumstances.

    The reality is that opposition to this legislation has nothing to do with anything except weakening Tennessee's economy and providing one more false argument for those who cannot distinguish between Ideas and ideology.

    1. Mark You sound like a smart guy really you do. I live in Paris,Tn.the thing I cant find here in town you are saying I shouldnt buy ? I will vote everyone of these guys out of office you watch and see.

    2. Cash, you can buy whatever you want on the internet. I just object to government picking winners. This always was an unfair subsidy. You were able to benefit for years. It is ungracious to demand a continuation of a subsidy that does not benefit the general welfare, only select organizations.

      Self-styled conservatives need to rethink the merit of defending unfair privileges. One day Tennessee is going to finally deal with the immoral subsidies given to various interests through sales tax exemptions. We could ease the tax burden on many Tennessee businesses tomorrow by removing part of the sale tax exemption given to special interests by the Democrats. That would make Tennessee businesses subject to sales tax more competitive with out of state competitors.

    3. "Not taxing" is not a subsidy. "Not taxing" is the natural course of things. Taxation is the penalty.
      If this were truly bill to make the marketplace fair, then it would be a bill to remove sales tax.

      As it is, it's just a cleverly spun measure to separate us from our money to help cover their runaway spending habits.

      The gov't picked winners in this sweetheart deal are the big boys who can afford to track tax rates of 45 different states who charge sales tax. the losers are the "one man and a computer" type shops who can harness the global marketplace and not rely on just the local market for business but likely don't have the resources to comply. I agree that gov't picking winners and losers is a raw deal. I don't think you have the right perspective on who's getting the shaft or why.

      best way to make Tennessee businesses more competitive with out-of-state competitors would be to drop the sales tax. If it were a bit more convenient, I'd do all my grocery shopping in Kentucky! Downside to not living in a bordertown.

  7. That tax is just another increase in the size cost reach and power of government