Americans for Tax Reform sent a letter to members of the Michigan House of Representatives in opposition to House Bills 4202 and 4203. These bills would establish a tax on Internet sales and loosen the requirement that a business must have physical nexus in Michigan in order for the state to collect sales tax.
This bill would have terrible consequences for Michigan. It forces out-of-state businesses that bring even a small ownership stake into the state to collect taxes. This will provide a powerful incentive for businesses to stay entirely out of state, which means less investment in Michigan. Anything that discourages investment is bad policy for a state that’s had a sluggish economic recovery, still struggling five years after the 2008 crisis.
The bill isn’t just bad policy; it’s probably unconstitutional. In Quill v. North Dakota the Supreme Court ruled that states could not make businesses without a physical presence in their state collect taxes. Interstate tax collection is a responsibility of Congress, not the states. As stated in the letter, “Poor enforcement of “use tax” law is no justification for constitutionally dubious legislation, especially if its only guarantee is to negatively impact Michiganders.”