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Friday, May 29, 2009
2:08 PM EDT
Kelly William Cobb

eTax on Internet Purchases Pending in Rhode Island

This following is cross-posted on www.StopETaxes.com.

The Rhode Island House Finance Committee held a hearing on Tuesday regarding affiliate nexus tax, or "Amazon Tax", legislation that would tax virtually all goods purchased via the internet.

In addition to being a $100 million tax increase on Rhode Island consumers, House Bill 6164 would fly in the face of a supreme court ruling and the interstate commerce clause of the U.S. Constitution that bars states from requiring out-of-state retailers to collect a sales tax.  The bill will also put Rhode Island at a competitive disadvantage with other states working to ensure that internet transactions remain tax free.

The House Finance Committee has decided to reevaluate the measure and held it for further study following their hearing, however it is likely that the measure will reemerge in the coming weeks.

Rhode Island residents, CLICK HERE NOW to write your state legislator in Rhode Island and tell them to oppose taxes on internet purchases!

Similar proposals were also under consideration in Minnesota and have been passed by the legislature in Hawaii.  Click the following links for letters to Hawaii Gov. Linda Lingle and Minnesota Gov. Tim Pawlenty urging their opposition to the bills.

Also, see below for ATR's letter of opposition to the Rhode Island House Committee on Finance or click here for a PDF copy.

The Honorable Steven M. Costantino
Chairman, House Finance Committee
Rhode Island House of Representatives
120 Courtland Street
Providence, RI 02909
 
Dear Representative Costantino,
 
I write in opposition to House Bill 6164 and urge you to reconsider your support for the measure.  This bill would require out-of-state retailers to collect and remit the state’s sales tax on products purchased online by Rhode Islanders. The measure would not only circumvent federal interstate commerce law and the Dormant Commerce Clause of the United States Constitution; it would also put Rhode Island at a competitive disadvantage, encourage online-black markets, and – worst of all – raise taxes on Rhode Islanders.
 
Current jurisprudence, under the Supreme Court’s ruling in Quill v. North Dakota, requires that a business have a physical presence or “nexus” in a state in order for the state to compel that business to collect and remit sales taxes. However, House Bill 6164 attempts to circumvent this federal law by presuming that a company has a physical nexus if business is solicited through a third-party advertiser in the state – thereby requiring the retailer to collect sales tax. Not only does this legislation fly in the face of the Supreme Court’s ruling, but it will bring an unnecessary lawsuit to Rhode Island at a time when the affiliate nexus tax is already undergoing significant legal challenge in New York.
 
The affiliate nexus tax is also a net tax increase on Rhode Island residents and consumers. Economists of all political and ideological stripes concur that increasing taxes during a recession is bad for the economy and worse for consumers.
 
Additionally, this effort puts Rhode Islanders at a competitive disadvantage by inadvertently punishing in-state advertisers and other businesses. This tax expands the definition of doing business to include a retailer that, while based out of state, advertises on a Rhode Island-based website using a banner ad or other link. If advertising with Rhode Island-based websites were to create a nexus for out-of-state retailers, these retailers will simply choose to terminate advertising agreements with Rhode Island-based websites.
 
Finally, taxing consumers that download products such as music and movies from out-of-state retailers will encourage illegal downloading at a time when providers of these digital goods are working hard to establish a legitimate online market.  The bill would essentially incentivize online piracy, reversing a hard fought trend toward legal downloads.
 
For these reasons, I urge you to oppose any effort to enact an affiliate nexus tax in Rhode Island. If you have any questions, please contact Kelly Cobb, state affairs manager, at (202) 785-0266.
 
Onward,
Grover Norquist
 
CC:         Rhode Island House Finance Committee

 

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