Senators to Unveil Massive Internet Tax


Posted by Kelly William Cobb on Wednesday, April 13th, 2011, 5:51 PM PERMALINK

Just in time for tax day, Sens. Dick Durbin (D-IL) and Mike Enzi (R-WY) are expected to unveil a bill shortly that would permit - for the first time - states to collect taxes on Internet, catalog, and other sales when the seller is not based in the state.  All told, the estimated $23 billion Internet tax hike would permit a small cartel of states to reach outside of their borders to force individuals and businesses who aren't even residents to collect taxes.

The Durbin-Enzi bill is not just an enormous tax hike, its a threat to federalism, accountable government, and interstate commerce.  Below is an excert from ATR's policy brief (click here for the full document) on the Senate plan to tax what you buy online:

The federal Main Street Fairness legislation to authorize a compact for Streamlined Sales Tax (SSUTA) compliant states would allow states to raise taxes by an estimated $23 billion. Under the U.S. Supreme Court decisions in Bellas Hess v. Illinois and Quill v. North Dakota, a state cannot require an out-of-state retailer without a physical presence to collect and remit taxes, as this places an impermissible burden on interstate commerce. Main Street Fairness legislation would give Congress’s stamp of approval to circumvent this physical nexus requirement. The legislation would allow SSUTA compliant states to extend tax collection obligations to remote, out-of-state retailers. This would expressly permit – for the first time – state tax collection on Internet, catalogue, and other sales where the seller is not based in the state.

In addition to raising taxes, SSUTA poses a direct threat to federalism and accountable government. First, the project itself allows a small cartel of tax administrators to write multiple states’ tax codes. Federal legislation would incent revenue-hungry states to join this cartel. Second, it exports the burden of tax collection to non-voting out-of-state individuals and businesses that have little ability to petition state and local governments. It puts a significant burden on out-of-state actors to comply with 8,500 tax jurisdictions (brick-and-mortar stores comply with only one), without the ability to object to the multitude of tax rate increases proposed across the country every year.

Americans for Tax Reform strongly supports simplifying federal and state tax codes, and leveling the playing field for all individuals and retailers by lowering tax rates and broadening the tax base. However, as reform must first do-no-harm, ATR opposes any effort – including Main Street Fairness legislation – to reform the tax code in a way that raises revenue for government, without offsetting tax cuts of equal or greater size. Our concerns regarding federalism, accountability, interstate commerce burdens, and the authorization of a state tax cartel are secondary to our goal of simplification, but nevertheless very significant.

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