America's independent, non-partisan advocate for overburdened taxpayers.

 

Blog Contributors

Brandon Arnold
Vice President of Government Affairs 

Dan Barrett
Research and Outreach Manager 

Demian Brady
Director of Research 

Christina DiSomma
Communications Intern 

Timothy Howland
Creative Content Manager 

Curtis Kalin
Communications Intern 

Ross Kaminsky
Blog Contributor 

David Keating
Blog Contributor 

Douglas Kellogg
Communications Manager 

Sharon Koss
Government Affairs Intern 

Richard Lipman
Director of Development 

Joe Michalowski
Government Affairs Intern 

Diana Oprinescu
Communications Intern 

Austin Peters
Communications Intern 

Kristina Rasmussen
Blog Contributor 

Lee Schalk
State Government Affairs Manager 

Pete Sepp
Executive Vice President  

Nan Swift
Federal Government Affairs Manager 

The Amazing Illegal Tax Discovery from Today's Commerce Hearing


Andrew Moylan
August 1, 2012

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.


 

Comment on this blog

Nickname
Comment
Enter this word:

User Comments

Submitted by best vitamin c serum at: April 19, 2014
Thanks for taking the time to discuss this, I feel strongly about it and love learning more on this topic. If possible, as you gain expertise, would you mind updating your blog with more information? best vitamin c serum

Submitted by aspirateur industriel at: April 19, 2014
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 DeMin aspirateur industriel

Submitted by Leonardo at: April 19, 2014
I really find this article very informative and interesting. Авточасти за Ауди

Submitted by BigBoy1980 at: April 19, 2014
Lots of thanks for this post.I think it is a very good post. It helps us many away. So many many thanks for this article. http://chastite.bg/

Submitted by Anonymous at: April 19, 2014
Such a very useful article. Very interesting to read this article.I would like to thank you for the efforts you had made for writing this awesome article. windows 8.1 update 1 start menu

Submitted by Anonymous at: April 19, 2014
This is just the information I am finding everywhere. Thanks for your blog, I just subscribe your blog. This is a nice blog. revenda de hospedagem

Submitted by Anonymous at: April 19, 2014
I definately enjoy every little bit of it and I have you bookmarked to check out new stuff of your blog a must read blog!!!! Engraved Medical ID Alert Jewelry

Submitted by tech333 at: April 19, 2014
This could be the appropriate blog for everyone who hopes to be familiar with this topic. You definitely put a brand new spin on a topic thats been written about for several years. Great stuff, just excellent! Easter Sunday 2014

Submitted by mery93 at: April 19, 2014
Very good write-up. I absolutely love this website. Thanks! Here you can also buy real youtube views cheap.

Submitted by Anonymous at: April 19, 2014
I love the humor your post has offered. I enjoyed this site a lot. Keep posting article like this. It is fun. Nice photography too! Skype resolver

Submitted by Anonymous at: April 19, 2014
Social media marketing is one of the most efficient ways to market a company or product and help get Facebook fans is one of the most common aspects used in SMM..... Sanibel Attorney

Submitted by Anonymous at: April 19, 2014
Welcome to Atlanta Plumber Repair, offering you with plumbing services in the Atlanta area and surrounding areas as well. Where can I buy Venus factor

Submitted by Anonymous at: April 19, 2014
I thought it was going to be some boring old post, but it really compensated for my time. I will post a link to this page on my blog. I am sure my visitors will locate that extremely useful.. learn english speaking

Submitted by Anonymous at: April 19, 2014
Lots of thanks for this post.I think it is a very good post. It helps us many away. So many many thanks for this article. dell e6430

Submitted by Anonymous at: April 19, 2014
Lots of thanks for this post.I think it is a very good post. It helps us many away. So many many thanks for this article. how to create a website

Submitted by luisbrown at: August 13, 2013
Illegal tax is a great problem for every country. Government lost a pill organizers lot of money by this.

Submitted by bad-innredning.toaletter-bideer.com at: August 7, 2013
Keep up the wonderful piece of work, I read few articles on this website and I believe that your site is really interesting and contains lots of excellent info . bad-innredning.toaletter-bideer.com