Government Bytes


Keeping Economy Free from Internet Sales Tax Mandate Is About Your Rights

by Douglas Kellogg / /

There’s yet another volley out from the pro-Internet sales tax mandate crowd, this one from the supposedly conservative side of the aisle – “supposedly” because changing the law to chase revenue just doesn’t seem like a “conservative principle.”

It is not just the additional tax complexity imposed on interstate transactions that makes MFA bad policy, but the destruction of traditional taxpayer protections that would extend government taxing power to a degree we have never seen before. 

That’s just the beginning of why this article should lead to many questions from online business, taxpayers, and anyone concerned with fiscal freedoms.

The first line kicks off the questioning with the statement, “The federal government has a policy that directly puts Main Street brick-and-mortar retailers at a competitive disadvantage.”

If you want to call the U.S. Constitution, state sovereignty, and Supreme Court precedent, “a federal policy,” we’ll tolerate that phrasing for now – but for taxpayers and businesses these “federal policies” are needed protection against reckless, budget-busting, revenue-hungry state and local governments that have no interest in shrinking themselves if there’s any tax dollar out there they can devour.

How does the article argue for states’ rights while supporting a policy that would tear down the vital boundary that protects a state’s citizens from being subject to another state’s government when they have no physical presence in that state?

Stated more plainly: Would a business owner in South Carolina feel their state’s sovereignty is particularly strong when New York tax officials show up to audit him because someone from Brooklyn ordered something from his store?

Should we also allow a state government like Illinois to go after the gift shop in Montana where a Chicago resident bought a t-shirt on vacation?

How is it “fair” to make states with the most expansive and invasive tax laws more powerful by letting them interfere with out of state entities that interacted with their citizens?

What is “conservative” about scrapping long-standing taxpayer and business protections, unleashing tax collectors from reckless big states, and thus killing businesses in one of the few bright spots in our economy?

The article then goes on to contend that “you cannot honestly argue for returning control from Washington to the states and then say ‘but not in this case.’” Actually there are many “cases” in which our Constitution’s commerce clause provides safeguards against states’ excesses. (Anyone interested in limiting government probably wants all the abusive powers the federal government has been exercising to go away, not be transferred to another government.)

Congress has recognized this imperative in the past, through laws that forbid higher state taxes on air carriers than on other businesses, limit the applicability of stock transfer taxes, among a host of examples.

Is the author actually arguing to repeal all these protections and raise Americans’ tax burdens?

It’s understandable how politicians from any party see a revenue grab, especially one that comes at the expense of people who cannot vote for you (taxation without representation), as enticing.

But how can educated groups or citizens honestly fall for MFA, which would empower state and local taxing authorities to force out-of-state businesses to collect – and carry the burden for collecting – sales taxes.

Especially since those governments can already collect use tax from taxpayers who live within their borders!

They also reap major revenues right now from big-box outfits that integrate their physical stores with online shopping options. And there’s a third source of money: taxes on Internet sales made between a customer and a business located in the same state (which can easily happen in big states like Texas and California).

That’s right, we’re being fed a sob story as if these poor states have been stripped of all means. But, they can collect anything due to them already…

They just prefer to harass people who can’t vote for them and place the cost of compliance on someone else, while conveniently not having to disturb their voters with an invasive tax collection process.

Ultimately this is a losing game – with over 9,000 taxing jurisdictions involved, businesses (and by extension their customers) across the country will suffer, including those in the hometowns of politicians who support the MFA scheme.

But perhaps the politicians and opportunistic big businesses looking to implement an Internet Sales Tax Mandate will start to get the picture as voters show they share these questions and concerns.

An NTU/R Street poll conducted by Mercury found 57 percent of respondents were against an MFA-type scheme – strong majorities were opposed across every demographic group but one.

A Georgia primary candidate can testify to that as he took a hit recently for claiming to be against tax hikes, while supporting MFA.

Perhaps that’s because more “brick and mortar” stores than ever are now also online sellers – making up 38 percent of total online sales – and they aren’t letting singular self-interest trump taxpayer rights. 

Now one final question: How does one who favors ‘limited government’ back a policy that would do so much to un-limit government?