Internet Sales Taxes Attack States' Rights; Government Intervention Kills Competition

The Washington Times (Washington, DC), December 3, 2012 | Go to article overview

Internet Sales Taxes Attack States' Rights; Government Intervention Kills Competition


Byline: Jessica Melugin, SPECIAL TO THE WASHINGTON TIMES

Proponents of Internet sales taxes are asking the lame-duck Congress to bless their state tax cartel as part of a larger tax reform package by passing the Marketplace Equity Act (H.R. 3179) and its companion in the Senate, the Marketplace Fairness Act (S. 1832). These aren't your average tax increases, but grim blueprints for government's future relationship with the online world. Long after we've either swerved at the last minute or gone off the fiscal cliff a la Thelma and Louise, we'll have to live with the harmful consequences of expanding government to every corner of the Internet.State and local governments already can tax in-state sellers regardless of their method of delivery to consumers - online, through the mail or in person. Now some states want Congress to let them expand their reach to tax businesses that have no physical presence and no political voice within their borders.This interstate grab clearly is a violation of the principle of no taxation without representation that so animated the Founding Fathers. The Supreme Court said as much in its 1992 Quill Corp. v. North Dakota decision. Thus, under the current regime, sales taxes are assessed only on purchases in which the seller has a store or warehouse in the buyer's state. For example, if a New Yorker buys a book online from a California retailer, the purchase is taxed only if the retailer also has a nexus - that is, a physical presence - in the Empire State. This prevents New York from imposing its tax regime on a Golden State business that has no say in the shaping of New York tax law.The proposed legislation removes that safeguard by codifying into law the multistate Streamlined Sales and Use Tax Agreement (SSUTA). The stated goal of the SSUTA, which 24 states have passed as legislation, is to simplify and modernize sales and use tax administration. However, the agreement also calls for Congress to overturn Quill and allow remote taxation, so the unarticulated goal of the SSUTA is to form a de facto state tax cartel.In practice, this means member states agree to simplify their sales tax rates and bases in exchange for the lucrative privilege of taxing businesses in other states. For example, under the SSUTA scheme, a state could collect tax from a retailer with no physical presence within its borders if one of its residents purchased from that retailer. Never mind that the company being taxed has no voice in what items the state decides to tax or at what rates, and that the company receives no benefits from any services for the tax dollars it sends out of state. …

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Internet Sales Taxes Attack States' Rights; Government Intervention Kills Competition
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