Katie McAuliffe

From My State to Yours: Internet Sales Tax Legislation Equals Cross-border Tax Liens


Posted by Katie McAuliffe on Thursday, April 25th, 2013, 6:24 AM PERMALINK

The Senate has been holding votes on S.743, the Marketplace Fairness Act (MFA).  A procedural vote was just held with 75 in favor and 22 opposed.  MFA doesn't just mean taxes it means tax enforcement that includes audits, court proceedings, and tax liens.

Tax collectors are poised to expand their tax base to people who cannot vote for them.  Under MFA, nothing prevents Illinois from aggressively going after businesses in Louisiana that they believe haven’t paid enough in sales taxes.  

MFA says that businesses in all 50 states that sell remotely have to collect and remit sales taxes to the states they sell into. However, nothing prevents Business in Texas from being subject to the New York taxation authority and the New York court system.

States are required to provide online sellers software to comply, but there is no requirement for a national software system in the MFA, so Businesses could feasibly have 45 different software regimes to implement.
States claim they are losing out on $23 billion, in revenue, but that’s a nationwide number and only half comes from online sales.  States are arguing over a shared number somewhere between about $8 and $12 billion.  The software implementation will certainly cost more than each state’s share of that figure.

For some more perspective, the cumulative total of all state general funds is $668 billion, $8 to $12 billion equals one percent of that figure. States want a massive expansion of tax authority for less than 1% of their budget.

This is a massive expansion of tax authority across state borders for a plan that doesn’t raise enough money to even pay for itself. Its no wonder we’re in budget short falls everywhere.  


From My State to Yours: Internet Sales Tax Legislation Equals Tax Cross-border Tax Liens


Posted by Katie McAuliffe on Wednesday, April 24th, 2013, 4:55 PM PERMALINK

The Senate has been holding votes on S.743, the Marketplace Fairness Act (MFA). A procedural vote was just held with 75 in favor and 22 opposed.  MFA doesn't just mean taxes it means tax enforcement that includes audits, court proceedings, and tax liens.
 
Tax collectors are poised to expand their tax base to people who cannot vote for them.  Under MFA, nothing prevents Illinois from aggressively going after businesses in Louisiana that they believe haven’t paid enough in sales taxes. 
 
MFA says that businesses in all 50 states that sell remotely have to collect and remit sales taxes to the states they sell into. However, nothing prevents Business in Texas from being subject to the New York taxation authority and the New York court system.
 
States are required to provide online sellers software to comply, but there is no requirement for a national software system in the MFA, so Businesses could feasibly have 45 different software regimes to implement.
 States claim they are losing out on $23 billion, in revenue, but that’s a nationwide number and only half comes from online sales.  States are arguing over a shared number somewhere between about $8 and $12 billion.  The software implementation will certainly cost more than each state’s share of that figure.
 
For some more perspective, the cumulative total of all state general funds is $668 billion, $8 to $12 billion equals one percent of that figure. States want a massive expansion of tax authority for less than 1% of their budget.
 
This is a massive expansion of tax authority across state borders for a plan that doesn’t raise enough money to even pay for itself. Its no wonder we’re in budget short falls everywhere.

More from Americans for Tax Reform


The Marketplace Fairness Act, Subjecting Your Business to Every State's IRS


Posted by Katie McAuliffe on Monday, March 11th, 2013, 5:50 AM PERMALINK

The Senate Budget Committee will hold a budget resolution markup in the coming week.   One might suspect that the Main Street Fairness Act sponsors will make play to include an internet sales tax messaging amendment to the Senate Budget Resolution, as budget resolutions can sometimes become a free-for-all. 

However, proponents of the Marketplace Fairness Act could wait until the floor debate to introduce an amendment because its likely they could round up 50 floor votes, which is the threshold for amendments to the budget resolution.  

This is unfortunate because it’s just a bad bill.  Businesses in Virginia would become tax collectors for other states, and if there were any disputes at the end of the year those businesses would be subject to out of state revenue departments and courts.

A coalition of free market thinkers released a letter today opposing the Marketplace Fairness Act.  Read it here.

To voice your opposition to Marketplace fairness, visit www.taxeswithoutborders.org to contact your congressman and senators.

If you need some more convincing, below are some of the strongest arguments rehashed as to why this is a bad idea.

Flaws in the Internet Sales Tax Mandate

How it works

At the end of each year businesses are responsible for sales tax.  They can choose to tax their customers at the point of sale or pay out what they owe in sales tax at the end of the year.  Businesses therefore act as a tax collection arm for the state in which they do business.  The Internet sales tax mandate would force businesses to become sales tax collectors for all states.  For example, if a customer in New York State makes a purchase from a company based in Virginia, the Virginia business would have to collect New York sales tax from the customer and then send the collected tax back to New York.  At the end of the year if there are any disputes over sales tax collection the Virginia business would be subject to the New York Department of Revenue and New York Courts.

Threatens Privacy

In order to collect the proposed internet sales tax, businesses would be forced to send personal information about their customers to a host of state revenue departments. This opens consumers up to the very real potential of losing personal information. In South Carolina, for example, hackers gained access to tax return data inlcuding approximately 3.8 million Social Security numbers, 387,000 credit and debit card numbers and 657,000 business tax filings filed with the SC Department of Revenue. Hackers have consistently proven they possess the capabilities to overcome many security measures. Government agencies lack the expertise and resources to properly protect the personal information they already gather. A law that mandates they collect more information only opens more individuals and businesses to the dangers associated with the loss of personal data.

Slippery Slope

To some people, passing a federal law authorizing states to collect internet sales tax across their borders may seem like a small change. However, eliminating the need for businesses to have a physical presence in a state in order to be taxed encourages states to tax non-residents who have no recourse to fight against said taxes. Additionally, this change would provide a precedent for lawmakers to authorize a host of new taxes on internet usage, ecommerce, and other services associated with the internet. With a digital goods tax (a tax on digital music, e-cards, video game accessories, etc.) being considered in Congress and the Internet Tax Freedom Act of 1998, which protects taxpayers from taxes on internet access and other ways, expiring in 2014, the passage of an internet sales tax would be a dangerous boost to greedy coalitions pushing for more internet based taxes. Essentially, an internet sales tax is a step towards states increasing taxes on consumers they do not serve and would aid government efforts to profit from areas in which taxpayers are currently protected from taxation.

Too Confusing

If Congress were to pass an internet sales tax mandate, a small business, for example an individual who sells large amounts of jewelry on Etsy, would have to comply with a host of different tax codes for every state and municipality they sold to. With over 9,600 of these state and local tax codes, this would be confusing and an onerous burden to place on start-up businesses that have thrived online precisely due to the lack of internet regulations.

In response proponents may point to a small seller exemption of $1 million to alleviate the financial compliance burden. In fact there could be other definitions for what constitutes a small business under an online taxation scheme.   The Small Business Administration defines a small business as one, whose Annual receipts do not exceed $5.0 to $21.0 million, depending on the particular product being provided.  Additionally some have suggested that number of employees could be used for the exemption standard. However, the mere inclusion of a small seller exemption is an admission that this tax scheme would cause harm to small business.

Some may argue that the Streamlined Sales Tax Agreement would eliminate the burdensome number of tax jurisdictions.  However, the legislation as introduced in the 113th Congress, gives states the option to either meet the SSTA standards or other minimum standards as laid out in the bill.  If states have not been able to agree on a SSTA in the last ten years, what makes us think that they will now, especially when given the option for meeting far lower standards?

Finally granted that software could solve the burdensome compliance problem, because this is readily available.  However, there is not a solution to the dispute resolution problem – Oklahoma businesses subject to revenue departments and court systems in California – which would be overly burdensome for a smaller business doing more than $1 million in remotes sales. 

Discourages Tax Competition

An internet sales tax mandate will create competition among states for higher taxes, rather than lower taxes. Currently, states can only tax those consumers who reside within their borders. This “physical presence standard” ensures that the businesses taxed by states have the ability to express their approval or displeasure with state tax code through elections, referendums, etc. Eliminating the physical presence standard means that states will increasingly seek to collect taxes across their borders from businesses with no recourse. Thus states will compete for revenue by increasing cross-border taxes, rather than lowering taxes. In difficult economic times when many cash-strapped states are desperate for revenue, an incentive for them to raise taxes can never be beneficial.

Expands State Tax Authority

States have always taxed those people and businesses within their physical borders because legal and judicial precedents clearly instruct them to do so. The Supreme Court ruled in a case titled Quill v. North Dakota that the Constitution’s Commerce Clause establishes the need for a business to have a physical presence in a state in order for that state to collect sales tax from it. An internet sales tax mandate would overturn this decision, and would also go against the spirit of laws such as the Internet Tax Freedom Act of 1998.

The 1998 law banned taxes on internet access and other means of internet taxes in order to promote economic growth through the free and open internet. The benefits of such policies can be clearly seen in the success of both large internet companies like Amazon and small-selling platforms such as EBay. Expanding state tax authority by passing an internet sales tax mandate making businesses into tax collectors for states where they cannot vote and they may be subject to legal action is unprecedented harmful legislation.


Marketplace Fairness in the 113th Congress


Posted by Katie McAuliffe on Thursday, February 14th, 2013, 5:45 AM PERMALINK

February 14, 2012

Dear Senators & Congressmen:

In light of today’s introduced legislation, I write to you on behalf of Americans for Tax Reform in opposition to enacting Intent and remote sales tax collection legislation. While achieving "fairness" may be a laudable goal, it cannot be an excuse for increasing the burden on taxpayers. We believe that there are a number of problems with the Marketplace Fairness Act - most importantly, the bills would force customers to pay more in taxes.

At the end of each year businesses are responsible for sales tax. They can choose to tax their customers at the point of sale or pay out what they owe in sales tax at the end of the year. Businesses, therefore, are the immediate taxpayer, or act as a tax collection arm for the state in which they are located. Remote sales tax would force businesses to become sales tax collectors for all states. For example, if a customer in New York State made a purchase from a company based in Virginia, the Virginia business would have to collect New York sales tax from the customer and then send the collected tax back to New York. At the end of the year if there are any disputes over sales tax collection, the Virginia business would be subject to the New York Department of Revenue and New York Courts.

In order to collect the proposed remote sales tax, businesses would be forced to send personal information about their customers to a host of state revenue departments. This opens consumers up to the very real potential of losing personal information. In South Carolina, for example, hackers gained access to tax return data, including social security numbers, of 5.7 million people and 700,000 businesses. Hackers have consistently proven they possess the capabilities to overcome many security measures. Government agencies lack the expertise and resources to properly protect the personal information they already gather. A law that mandates they collect more information only makes more individuals and businesses vulnerable to the dangers associated with the loss of personal data.

Of even greater concern is that a remote sales tax will create competition among states for higher taxes, rather than lower taxes. Currently, states can only tax those consumers who reside within their borders. This “physical presence standard” ensures that the businesses taxed by states have the ability to express
their approval or displeasure with state tax code through elections, referendums, etc. This legislation encourages states to collect taxes across their borders from businesses with no recourse. Thus states will compete for revenue by increasing cross-border taxes, rather than lowering taxes. An incentive to raise taxes can never prove beneficial.

Finally, this legislation grants states new tax collection authority without removing equivalent taxing authority elsewhere. Therefore, this legislation can only be viewed as a tax increase. We are open to speaking with members about addressing these issues. Please contact Katie McAuliffe by email, kmcauliffe@atr.org, or phone, 202-785-0266, with any questions or comments.

Onward,

Grover G. Norquist


Tell Congress: No Internet Sales Tax


Posted by Katie McAuliffe on Wednesday, January 23rd, 2013, 10:38 AM PERMALINK

The internet sales tax mandate would be a major change in the way businesses operate especially around tax season.  At the end of each yearbusinesses are responsible for paying sales tax.  They can choose to tax their customers at the point of sale or pay out what they owe in sales tax at the end of the year.  Businesses therefore act as a tax collection arm for the state in which they do business.  

The internet sales tax mandate would force businesses to become sales tax collectors for all states.  For example, if a customer in New York State makes a purchase from a company based in Virginia, the Virginia business would have to collect New York sales tax from the customer and then send the collected tax back to New York.  

At the end of the year if there are any disputes over sales tax collection the Virginia business would be subject to the New York Department of Revenue and New York Courts.  While this is scary in itself, there are a number of other problems that should cause our elected officials to think twice before they implement this new tax scheme:

Threatens Privacy – Business and state revenue boards with a track record of losing private information will have more chances to do so.

  • Slippery Slope – Opens the door for further government intervention in the internet and for states to reach across their borders for other taxes.
  • Too Confusing – Small businesses would be forced to accommodate over 9,000 highly variable state and local tax codes and be required to settle disputes with out of state revenue boards in out of state courts.
  • Discourages Tax Competition -Rather than competing to lower taxes and attract businesses, states will compete to raise taxes on residents of other states
  • Expands State Tax Authority - State Governments will be able to tax across their borders despite clear legal and judicial precedentarguing otherwise

Write your congressman and senators urge them to oppose efforts to impose an internet sales tax mandate!

 


Internet Sales Tax, a Legislative Hydra


Posted by Katie McAuliffe on Monday, January 14th, 2013, 6:34 AM PERMALINK

Defeating Internet Sales tax may seem like a Herculean feat, since businesses and state government have aligned against the average taxpayer.  But Internet sales tax keeps getting squashed at the state level and it will get crushed at the federal level as well because it is simply a bad plan. 

There is a new tactic being taken at the state level by Virginia Governor Bob McDonnell.  His plan to rebuild the Virginia Transportation Fund gets rid of the gas tax and raises the sales tax from 5% to 5.8% and reallocates funding as such:

First, 1.125 cents of the 5.8 percent sales tax will be dedicated to public education ($310 million over 5 years). Second, 0.5 cents of the 5.8 percent sales tax will be given back to the localities to use at their discretion ($138 million over 5 years). Third, 0.5 cents of the 5.8 percent sales tax will be given back to the localities for local transportation priorities ($138 million over 5 years). Finally, 3.675 cents of the 5.8 percent sales tax will be provided to the Transportation Trust Fund ($1.02 billion over 5 years).

However to get to these numbers McDonnell requires the passage of the internet sales tax.  He looks to the potential ability of having out of state businesses collect Virginia Sales tax to increase Virginia state revenues, but ignores that he will be putting Virginia businesses under the jurisdiction of every other state’s department of revenue.  Requiring businesses to comply with other state revenue departments will be costly to business in terms of compliance and in dispute resolution. 

Just incase you missed it, McDonnell is setting up his Transportation Fund plan based on a federal law that does not exist, and likely will not pass.

Here is the long and short of why any implementation of internet sales tax is bad:

Flaws in the Internet Sales Tax Mandate

How it works

At the end of each year businesses are responsible for sales tax.  They can choose to tax their customers at the point of sale or pay out what they owe in sales tax at the end of the year.  Businesses therefore act as a tax collection arm for the state in which they do business.  The Internet sales tax mandate would force businesses to become sales tax collectors for all states.  For example, if a customer in New York State makes a purchase from a company based in Virginia, the Virginia business would have to collect New York sales tax from the customer and then send the collected tax back to New York.  At the end of the year if there are any disputes over sales tax collection the Virginia business would be subject to the New York Department of Revenue and New York Courts.

Slippery Slope

To some people, passing a federal law authorizing states to collect internet sales tax across their borders may seem like a small change. However, eliminating the need for businesses to have a physical presence in a state in order to be taxed encourages states to tax non-residents who have no recourse to fight against said taxes. Additionally, this change would provide a precedent for lawmakers to authorize a host of new taxes on internet usage, ecommerce, and other services associated with the internet. With a digital goods tax (a tax on digital music, e-cards, video game accessories, etc.) being considered in Congress and the Internet Tax Freedom Act of 1998, which protects taxpayers from taxes on internet access and other ways, expiring in 2014, the passage of an internet sales tax would be a dangerous boost to greedy coalitions pushing for more internet based taxes. Essentially, an internet sales tax is a step towards states increasing taxes on consumers they do not serve and would aid government efforts to profit from areas in which taxpayers are currently protected from taxation.

Too Confusing

If Congress were to pass an internet sales tax mandate, a small business, for example an individual who sells large amounts of jewelry on Etsy, would have to comply with a host of different tax codes for every state and municipality they sold to. With over 9,000 of these state and local tax codes, this would be confusing and an onerous burden to place on businesses that have thrived online precisely due to the lack of internet regulations and taxes.

Supporters of an internet sales tax mandate claim that software will be made available to ease the burden of compliance with so many tax codes, yet this software will have to be approved by all states and purchased.  For small businesses already struggling in the recession, this barrier to the market is a burden that cannot be afforded. In response proponents may point to a small seller exemption to alleviate the financial burden.  However, the mere inclusion of a small seller exemption is an admission that this tax scheme would cause harm to small business.

Some may argue that the Streamlined Sales Tax Agreement would eliminate the burdensome number of tax jurisdictions.  However, the legislation as introduced in the 112th Congress, gave states the option to either meet the SSTA standards or other minimum standards as laid out in the bill.  If states have not been able to agree on a SSTA in the last ten years, what makes us think that they will now, especially when given the option for meeting far lower standards?

Discourages Tax Competition

An internet sales tax mandate will create competition among states for higher taxes, rather than lower taxes. Currently, states can only tax those consumers who reside within their borders. This “physical presence standard” ensures that the businesses taxed by states have the ability to express their approval or displeasure with state tax code through elections, referendums, etc. Eliminating the physical presence standard means that states will increasingly seek to collect taxes across their borders from businesses with no recourse. Thus states will compete for revenue by increasing cross-border taxes, rather than lowering taxes. In difficult economic times when many cash-strapped states are desperate for revenue, an incentive for them to raise taxes can never be beneficial.

Expands State Tax Authority

States have always taxed those people and businesses within their physical borders because legal and judicial precedents clearly instruct them to do so. The Supreme Court ruled in a case titled Quill v. North Dakota that the Constitution’s Commerce Clause establishes the need for a business to have a physical presence in a state in order for that state to collect sales tax from it. An internet sales tax mandate would overturn this decision, and would also go against the spirit of laws such as the Internet Tax Freedom Act of 1998. The 1998 law banned taxes on internet access and other means of internet taxes in order to promote economic growth through the free and open internet. The benefits of such policies can be clearly seen in the success of both large internet companies like Amazon and small-selling platforms such as EBay. Expanding state tax authority by passing an internet sales tax mandate would be an unprecedented step that flies in the face of decades of legal and judicial policy.

Threatens Privacy

In order to collect the proposed internet sales tax, businesses would be forced to send personal information about their customers to a host of state revenue departments. This opens consumers up to the very real potential of losing personal information. In South Carolina, for example, hackers gained access to tax return data, including social security numbers, of 5.7 million people and 700,000 businesses. Hackers have consistently proven they possess the capabilities to overcome many security measures. Government agencies lack the expertise and resources to properly protect the personal information they already gather. A law that mandates they collect more information only opens more individuals and businesses to the dangers associated with the loss of personal data.


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