Crossposted from

Last week, Connecticut joined a growing chorus of states considering a tax on e-commerce to help shore up budgets.  The state’s Joint Finance, Revenue and Bonding Committee held a hearing on Thursday where legislators hinted at eventual support for advancing the bill (HB 5481), which would require e-retailers to collect taxes on residents if they advertise through a third party based in the state.

While a fiscal note for the bill has not yet been provided, state lawmakers around the country seem more entranced with the potential revenue projections on paper that permit them to maintain current spending, rather than the real world implications of affiliate nexus tax laws. As we’ve argued before, e-retailers will simply sever their advertising agreements and avoid paying what is likely an unconstitutional tax increase.  This means no actual revenue increase for the state and a decrease of tax revenue from businesses who no longer profit from ad contracts. This has been evidenced in both Rhode Island and North Carolina. A fiscal impact statement on a similar bill in Virginia that, for the first time, highlighted some of these implications helped to kill that measure last month.
While the Connecticut bill is still being held in committee, lawmakers wisely decided to stall similar legislation (SB 806) last year. Connecticut residents: remind your state lawmakers why they didn’t enact an e-tax last session. CLICK HERE to take action.

Also, click here for ATR’s letter to the Connecticut Joint Finance, Revenue and Bonding Committee opposing the bill.