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The Amazing Illegal Tax Discovery from Today's Commerce Hearing
Today's Senate Commerce hearing on the awful Marketplace Fairness Act, a bill the likes of which we've been crusading against for more than a decade now, was a comedy of errors that would have been funnier if it weren't so sad. Despite a stacked panel of six supporters testifying against just one opponent, the proceedings proved that there are huge problems for taxpayers inherent in legislation to allow states force enormously burdensome sales tax collection requirements on remote retailers WITHOUT any physical presence there. In addition, the hearing led to a stunning discovery that one panelist's business may well be collecting sales taxes incorrectly and illegally. So much for "easy" and "accurate" tax collection.
Steven Bercu, CEO and co-owner of BookPeople book store in Austin, Texas, told the committee that he felt so strongly about collecting sales taxes that his business did so even for sales into states where he has no physical presence. He has no legal obligation to do so, but he likened it to a kind of civic obligation to support infrastructure and services in other states (nevermind the fact that shipping companies that help deliver his items already do plenty of that through income and gas tax burdens of their own).
The revelation of illegal tax collection came when Steve DelBianco, Executive Director of NetChoice, gave his testimony. In it, he presented a screenshot of a purchase he made on BookPeople's website this morning which showed that he was charged what was purportedly Virginia state sales tax of 8.25%. There's only one problem: Virginia's sales tax is 5%. Mr. Bercu quickly proclaimed that a mistake had likely been made and that he'd look into it with the provider of the service that calculates sales tax collection for his business. It turns out that 8.25% is actually the prevailing sales tax rate in Austin, Texas, where BookPeople is physically located. In all likelihood, this is the source of the mix-up.
While it was somewhat amusing to uncover this mistake, it also suggests that the tax was illegally charged to DelBianco. If BookPeople collected and remitted on behalf of Virginia, they illegally overcharged him because no business can collect more than the legal sales tax rate. If they collected and remitted to Texas, they illegally charged DelBianco on a transaction which was not subject to sales tax. Under current law DelBianco has no sales or use tax obligation whatsoever in Texas and if BookPeople charged him one, that was just as illegal as a grocery store charging someone sales tax on something in a state where food is exempt from it.
Let me state that I don't believe that Mr. Bercu and BookPeople are intentionally defrauding customers or governments. This is almost certainly an honest mistake made in the process of a good-faith effort, but it shows just how difficult accurate sales tax collection and remittance can be. His business was supposed to be the poster child for how easy collection is. After all, it's so easy that he does it even though he isn't legally required to! But even the best of intentions can't iron out mistakes resulting from the confusion of 9,600 taxing jurisdictions with different rules across the country. It also suggests that perhaps the reason Mr. Bercu and BookPeople were so convinced of the ease of collecting is that his business was simply charging everyone Austin's sales tax. Current law would need to change in order to accommodate that, but that sort of an origin-based taxation system is dramatically simpler and easier to comply with than what the Marketplace Fairness Act would impose.
In the end, the hearing was mostly a jumble of minimally-useful talking points from supporters and some brief but passionate questioning from the likes of Senators Jim DeMint (R-SC) and Kelly Ayotte (R-NH). The bottom line for taxpayers is still this: the Marketplace Fairness Act undermines basic taxpayer protections by eliminating the physical presence standard, imposes huge compliance and interstate commerce burdens, and does little or nothing to promote tax reform and revenue neutrality.97 Comments | Post a Comment | Sign up for NTU Action Alerts
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NTU's new State Affairs Manager Lee Schalk joins Doug & Manzanita (in Pete's absence) to discuss state taxpayer issues that are still popping up despite the summer heat. Also the 'Fiscal Five' & 'Outrage of the Week!'18 Comments | Post a Comment | Sign up for NTU Action Alerts
Majority of Voters Proclaim: “Extend Tax Cuts for All!”
A McClatchy-Marist poll shows that 52 percent of registered voters want the Bush Tax Cuts extended for all Americans, including those who make over $250,000 a year.
A view that stands in contrast to the President, who has made it clear that he will veto any attempt by Congress to extend the cuts for all, saying that:
“I would veto it and here’s why…to extend tax breaks for that top 2 percent of wealthiest Americans would cost us a trillion dollars over the next decade.”
This may be a hard sell for the President in today’s still tepid economy, especially when he is attempting to secure the youth vote and the Hispanic vote. These two key demographics, both of which are seen as pivotal in the presidential race, favored extending the tax cuts for all by margins of 69-29, and 62 percent to 36 percent, respectively.
Congressional Republicans, as well as presidential candidate Mitt Romney, both favor preventing the tax cuts from expiring on Dec. 31.
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The Wireless Tax Fairness Act, a bill that NTU has strongly supported for years, might be a step closer to becoming law if its sponsor Senator Ron Wyden (D-OR) has his way. He intends to introduce it as an amendment to S. 2884, a bill the Senate may consider next week. Wyden's legislation would protect taxpayers by freezing state and local charges on wireless phone service for five years and preventing them from imposing multiple and discriminatory taxes and fees.
This common sense legislation is one of few bills that enjoys wide bipartisan support both in and out of Congress. According to a MyWireless.org survey, 80% of respondents support the goals of the bill and Republicans and Democrats alike have aided its movement on Capitol Hill. Late last year, the House actually passed its version (sponsored by Arizona Republican Trent Franks and California Democrat Zoe Lofgren) unanimously on a voice vote. Wyden's amendment gives us hope that the Senate will pick up on that sentiment and pass the bill promptly.
As it stands today, wireless tax rates across the country are mind-numbingly insane. Legislators constantly proclaim the importance of wireless access because it supports economic opportunity and growth, but the taxes they levy on it tell a very different story indeed. Five states charge more than 20% in taxes, 23 states charge combined rates of higher than 15%, and in only ONE state in the nation (Nevada) will you face a lower charge on wireless services than for ordinary sales. Simply put, most states are levying "sin tax"-like charges on a technology they claim to love and support.
It's not the federal government's job to fix the details of each state's insane tax system, but it is their job to prevent states from enacting dumb tax policies that harm interstate commerce. There are few markets that are more interstate in nature than wireless service, so it's perfectly appropriate and necessary for the federal government to exercise its power to eliminate the worst abuses. We'll still have a lot of work to do to fix state tax codes after passing the Wireless Tax Fairness Act, but this is an extremely important first step and it's up to us to make sure Congress takes it soon.
Stay tuned to these pages next week for more information about how the bill will proceed and what you can to to help. In the meantime, we'll be gearing up our grassroots army to push Congress to pass this bill immediately.1 Comments | Post a Comment | Sign up for NTU Action Alerts
The so-called “Marketplace Fairness Act," a bill to impose onerous tax collection requirements on remote retailers, is back again for another bite at taxpayers' wallets. We've alerted you to this threat timeand time again, and now proponents and their big-money backers are trying to sneak it through once more. Introduced as an amendment to S. 2237 (a small business tax bill) by Senators Mike Enzi (R-WY), Dick Durbin (D-IL), and Lamar Alexander (R-TN), the measure would add to the burden governments heap upon items purchased online while undermining vital taxpayer safeguards. The Marketplace Fairness Act would…
It is particularly odious and contradictory to attempt hanging this proposal on a bill purporting to assist small businesses. S. 2237 is problematic for taxpayers in its own right, but is made all the worse with an Amendment that fails on so many counts. As a practical matter, the paltry “small seller exemption” contained in the language means that numerous firms will become ensnared in a web of higher tax-compliance overhead costs. Businesses that could be contributing to a more robust economic recovery will instead squander resources extricating themselves from this trap, or worse, resign themselves to oblivion.
As a philosophical matter, the amendment treats the Internet and e-commerce as a sinister, alien force for small business, when the opposite is true. Where would brick-and-mortar retailers be, for example, without the convenience of online inventory control, or other “B2B” transactions that make management so much more efficient today? What losses would retailers suffer without the new markets for goods and services for which the Internet has provided the portal? How many millions of everyday citizens, who have created thriving online “mom and pop” proprietorships, would be denied the opportunities to provide for their families? To be clear: No Senator who claims to support taxpayers and small businesses should vote for this amendment. There are fairer, less burdensome ways to address any real “level playing field” issues in this area of commerce.
It's unclear as of now how the Senate will proceed on this amendment or the underlying small business tax bill, but rest assured that we'll be hammering away to make sure that well-financed lobbyists don't fleece taxpayers and businesses with this awful bill.
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Donations to Pay Down Debt Soar
Today's Wall Street Journal reports the following:
"... there’s been a noticeable spike in voluntary payments made by taxpayers to pay down the government’s $15.7 trillion debt.
This is an option that we've suggested several times in the past for those who feel that they don't pay enough in taxes. Why be forced to pay more? Why not write a big check voluntarily and feel better about it? If you would like to make a gift to pay down the public debt, you can learn more here.
Double flashback: Virginia's "Tax Me More Fund" Needs Help0 Comments | Post a Comment | Sign up for NTU Action Alerts
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State Govt. Affairs Manager Brent Mead makes his final Speaking of Taxpayers appearance to discuss Wisconsin and California election results with Pete & Doug - plus, a new segment: the Fiscal Five...0 Comments | Post a Comment | Sign up for NTU Action Alerts
National Taxpayers Union released an open letter to Ohio Governor John Kasich yesterday giving due credit for his effort to reform income tax burdens, but warning against a damaging energy tax included in the proposal. The Governor’s plan would increase severance taxes on specific types of wells, harming oil and natural gas producers.
This step would undo the good from income tax reductions and curb the potential for job creation and taxable wages in the energy industry. An economic impact study by Kleinhenz Associates estimates that development of the Ultica Shale using existing tax structures will create over 200,000 jobs in the state, increasing output by over $22 billion and taxable wages by over $12 billion. Adding to the promising fiscal future of this industry, each well drilled will produce state and local incomes taxes while generating proceeds from commercial activity and current severance taxes. NTU reminded Governor Kasich that these benefits will not be fully realized if a drastic tax hike is imposed.
Trimming wasteful spending and modest spending restraint in recent years could have provided enough fiscal latitude to nearly eliminate the state income tax entirely. It is that type of common sense budget discipline that should accompany income tax reductions, not hikes on productive economic sectors.1 Comments | Post a Comment | Sign up for NTU Action Alerts
National Taxpayers Union released an open letter (available HERE) to Ohio Governor John Kasich yesterday giving due credit for his effort to reform income tax burdens, but warning against a damaging energy tax included in the proposal. The Governor’s plan would increase severance taxes on specific types of wells, harming oil and natural gas producers.
This part of the measure would undo the good from income tax reductions and curb the potential for job creation and taxable wages in the energy industry. An economic impact study by Kleinhenz Associates estimates that development of the Ultica Shale using existing tax structures will create over 200,000 jobs in the state, increasing output by over $22 billion and taxable wages by over $12 billion. Adding to the promising fiscal future of this industry, each well drilled will produce state and local incomes taxes while generating proceeds from commercial activity and current severance taxes. NTU reminded Governor Kasich that these benefits will not be realized if a drastic tax hike is imposed.
Trimming wasteful spending and modest spending restraint in recent years could have provided enough fiscal latitude to nearly eliminate the state income tax entirely. It is that type of common sense budget discipline that should accompany income tax reductions, not hikes on productive economic sectors.0 Comments | Post a Comment | Sign up for NTU Action Alerts
States Ready to Make Driving Even More Expensive
With summer rapidly approaching, Americans across the nation will be heading out onto the nation’s highways for vacations, but higher taxes may be lurking for intrepid travelers as cash-strapped states seek to evolve gas taxes into more costly forms.
Currently, states raise revenue for roads and bridges through a tax on fuel levied by the gallon, but the new proposal would tax drivers for miles traveled in addition to the taxes we already pay at the pump.
The current federal gas tax is 18.4 cents per gallon, whereas states are free to set their own fuel tax per gallon.
Minnesota and Oregon are already exploring technology that will keep track of miles driven, which has included GPS-like boxes which are inserted into people’s vehicles, pre-pay options whereby individuals can “buy” miles ahead of time, and software installed on smartphones to track distance.
These ‘next-generation’ gas and travel taxes, when added to tolls, other taxes, and the price of gasoline, could further empty America’s roads and reduce commerce. Adding to the cost of business, travel, and every day activity is not going to help the economy get back on track, or prove popular with overburdened taxpayers.0 Comments | Post a Comment | Sign up for NTU Action Alerts