Last week, Reps. Jackie Speier (D-CA) and Steve Womack (R-AR) introduced the Marketplace Equity Act of 2011 (H.R. 3179), which permits states to require out-of-state Internet retailers to collect the state’s sales tax with certain conditions. The legislation is the second state Internet-sales tax bill introduced in Congress this year, following the Main Street Fairness Act.

The Marketplace Equity Act is unacceptable to taxpayers as currently written. The measure lacks any taxpayer protections or other provisions to ensure state taxes are lowered as they are expanded to online and remote sales. The bill would also mark a blow to the physical nexus standard for tax collection, which has prevented the long arm of tax collectors from forcing residents in other states to comply with their tax codes, without offering taxpayers anything in return.

The push for a federal Internet tax bill comes in response to the 1992 U.S. Supreme Court decision Quill Corp. v. North Dakota. In the Quill case, the high court ruled that forcing companies without physical presence in a state to collect sales tax was a violation of the Commerce Clause. As Congress has constitutional authority to regulate interstate commerce, this law would effectively overturn the longstanding Quill decision, aiming to level the playing field between Internet and brick-and-mortar retailers.

Unlike the Main Street Fairness Act, which automatically triggered Internet taxes for states that were members of the Streamlined Sales Tax cartel, this bill requires each state to pass legislation to enact the new sales tax on remote sales. State bills that enact the law would constitute clear violations of the Taxpayer Protection Pledge, unless offset by cuts elsewhere. In this way, the Womack-Speier bill represent an improvement over the Main Street Fairness Act. Other means of ensuring the tax reform is revenue neutral are so far nowhere to be found, and legislators shouldn’t even consider new taxing authority without strongly protecting taxpayers from net tax increases. In its current form, the Marketplace Equity Act (along with the Main Street Fairness Act) is simply unpalatable for taxpayers.

Critically, ATR strongly urges the Super Committee to avoid including this measure in any deal. ATR completely rejects, in principle, the idea of somehow “balancing” out federal spending cuts with state tax increases. Federal spending is completely out of control and needs to be cut—not moved around in some shell game that results in a higher tax bill. The Super Committee should be focused on federal spending cuts, but those should never come by generating new state tax hikes – on the Internet or otherwise. The result would be bigger government and higher taxes.

CLICK HERE for a PDF of the statement and visit www.StopETaxes.com for more information on state level Internet taxes.