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To Tax or Not to Tax? The Online Sales Debate

The Marketplace Fairness Act would allow states to force Internet retailers to collect taxes from their customers.

by
Rodrigo Sermeño

Bio

May 2, 2013 - 2:34 pm
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Supporters of the bill say that the legislation would have no effect on federal revenues and would simply allow for the collection of sales taxes. The National Governors Associations (NGA) said that states need the $23 billion in lost revenue and the National Retail Federation says the proposal would simply roll back the unfair advantage online stores have on brick-and-mortar retailers.

“[The Marketplace Fairness Act] rectifies the discrimination against brick-and-mortar retail outlets of all sizes. Internet sellers now receive a subsidy of 8%-10% because they don’t collect sales tax on retail sales outside their states, a subsidy that harms other sellers,” said NGA’s Executive Director Dan Crippen. “Yet Internet sellers get the benefits of the world’s third-largest consumer base, not to mention state roads for delivery of their products, plus the protection of the state court systems to enforce business contracts.”

Lawmakers from states without a sales tax condemned the measure, saying it would burden retailers that are not currently required to charge sale taxes to customers.

Sen. Max Baucus (D-Mont), whose state does not collect sales taxes, said the bill would hurt businesses in Montana and other small businesses in America because it forces small businesses “to play tax collector for other states.”

The anti-tax-hike group Americans for Tax Reform (ATR) echoed the senator’s remarks, saying the bill would force businesses to collect taxes for all states.

“The legislation hands a small cartel of state tax administrators the ability to reach across state borders and export the burden of tax collection onto out-of-state businesses,” said ATR’s president Grover Norquist.

ATR maintains an anti-tax pledge that nearly every Republican in Washington has signed and suggested that the legislation can only be viewed as tax increase because “it grants states new tax collection authority without removing equivalent taxing authority elsewhere.” The group has yet to explicitly say that lawmakers would violate the pledge by voting for the bill.

The NGA fired back at ATR’s remarks about the bill, accusing the organization of trying to undermine legislation that “levels the playing field between Main Street and e-street.”

“The Marketplace Fairness Act is common-sense legislation that is simply about the collection of sales and use taxes already owed. The Americans for Tax Reform may not like this legislation, but they are not entitled to their own facts,” said the NGA in a statement.

The group also argues that the online sales tax bill does not violate the tax pledge because candidates for Senate office pledge to “one, oppose any and all efforts to increase the marginal income tax…and two, oppose any net reduction or elimination of deductions or credits.”

“Marketplace Fairness does neither. It is not a new tax or a tax increase. It clearly does not violate the pledge. In fact, the Americans for Tax Reform themselves admitted to leadership of the [NGA] that this was not a violation. To say anything else is disingenuous,” said the group in a statement.

House Republicans are by no means united in opposition to the bill. The House version of the bill already has roughly two dozen GOP sponsors.

“I’m a co-signer of the [Norquist] pledge. I’m a co-signer of the legislation. We have to collect the taxes that are due,” said Rep. Austin Scott (R-Ga.).

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Rodrigo is a freelance writer living in Washington, D.C.

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Top Rated Comments   
I'm tired of the gov't finding new ways to tax me. They get enough of my money already. Next you'll need a license and tax number to hold a garage sale or sell in the local thrifty nickel newspaper. The gov't can take a flying leap.
1 year ago
1 year ago Link To Comment
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All Comments   (13)
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Actually, this complication exists in spades in telecom. What happens is that there are companies that specialize in figuring out the tax down to the zip+4. You got amoney, you use Vertex, say - national coverage. You got less, you contract with someone like DPC (programmed by Satmar Chassidim, no kidding), now part of CCH, and buy a few states. They all send you updates every month, and the guys who do your billing osftware (like us :-)) interface their product to theirs.

Telephone VAR's have to do this. I'm not sure your shoestring operation could.
1 year ago
1 year ago Link To Comment
In the interest of fairness, Texas needs to raise taxes to stop the hemorrhage of business and people from California to Texas. And why would all cities not have a 10% sales tax as NYC does? How unfair is that?

Only a fool would think that this interest was "fairness". That would require the bill to be tax neutral. This internet tax scheme is obviously expected to bring in more tax revenue. But we have plenty of fools and the politicians who love them.

An internet tax fairness bill that lost tax revenue would never see the light of day.

Like an overweight person, the bigger that government gets the hungrier it becomes. There is not a single state or local government that needs money. What they need is privatization. Sandy Springs, Georgia.
1 year ago
1 year ago Link To Comment
“[The Marketplace Fairness Act] rectifies the discrimination against brick-and-mortar retail outlets of all sizes. Internet sellers now receive a subsidy of 8%-10% because they don’t collect sales tax on retail sales outside their states, a subsidy that harms other sellers,” said NGA’s Executive Director Dan Crippen.

Keeping your own property is not a "subsidy". I wish journalists/bloggers would call out this ingeniousness every time some pro tax a-hole calls it a subsidy when they don't get to wet their beak. WTF?
1 year ago
1 year ago Link To Comment
As has been noted, the out of state seller uses no services, he gets no police or fire or EMS protection, his customers don't use the local roads or sewer systems, his children don't use the local schools. Additionally, requiring businesses to collect for states outside their location is more than just the money: there are byzantine state and local taxes throughout the country, some things are taxed one place but not another, multiple rates apply, it's a compliance nightmare for any smaller business. Of course Amazon would like nothing better than to slow down any new start-ups that might challenge them.

It also penalizes those state who have low or no sales taxes to foster a better business climate for the benefit of higher-taxing states.

It's a tax hike, without doubt, and only a liar would try to claim it isn't.
1 year ago
1 year ago Link To Comment
Gee, whatever in the world did we do before sales taxes?

Very well. More money in my pocket and less money in the gov't's pocket to finance absurd schemes. Give me street lights, schools, bridges - I'm okay with that. Stop with the social engineering and de facto reparations.
1 year ago
1 year ago Link To Comment
---- "House Majority Leader Eric Cantor (R-Va.) and Speaker John Boehner (R-Ohio) have not taken a public position on the bill yet."

And they wonder why they are despised by the rank & file. How is it that the GOP blew Pelosi out of office, in no uncertain terms, in 2010, and we ended up with these clowns (Boehner & Boys) in control of Congress? These guys are five steps behind on EVERYTHING. Is it no longer a basic tenet of the conservative party that raising, or creating new, taxes in time of economic distress is always a bad thing? Tap tap! Hello? Tap tap tap ... They're not listening. Must be dining out with Obama again, while Moochelle is off shopping. I don't know who I despise more: Barry or Johnny. Neither one of them gives a crap about the American Taxpayer.
1 year ago
1 year ago Link To Comment
Your mistake is in thinking that the GOP is a conservative party. The GOP is demorat lite.
1 year ago
1 year ago Link To Comment
I'm tired of the gov't finding new ways to tax me. They get enough of my money already. Next you'll need a license and tax number to hold a garage sale or sell in the local thrifty nickel newspaper. The gov't can take a flying leap.
1 year ago
1 year ago Link To Comment
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