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Oppose Tax Hikes on Online Shopping!
An Open Letter to the New Mexico General Assembly
February 4, 2011
On behalf of the National Taxpayers Union’s 2,900 members in New Mexico, I urge you to oppose Senate Bill 95, which would tax out-of-state online retailers through their in-state marketing affiliates.
States that have attempted to prey upon online retailers beyond their borders through the “affiliate nexus” route have not raised the desired revenues. In fact, North Carolina officials report that they are not keeping track of collections from their tax scheme. Additionally, Rhode Island’s tax administrators say that their treasury has actually lost revenues following enactment of the tax. What these policies have done is impose high costs on the states through litigation and lost business activity. Both North Carolina and New York have been sued over this issue and the litigation continues to this day. Recently, a federal judge in Colorado temporarily enjoined the state’s requirement that online retailers report use tax obligations. Several major online retailers have also terminated their affiliates programs in Colorado and Rhode Island due to those states’ affiliate nexus and sales and use tax-reporting requirements. Furthermore, retailers have announced their intention to terminate their marketing programs in Illinois if the state implements affiliate nexus legislation now on the Governor’s desk. If SB 95 becomes law, New Mexico’s 1,200 affiliate marketers could suffer the same fate and the state could lose the $4.3 million in tax revenue of various kinds that affiliate marketers paid in 2009. A loss of business activity that shrinks the tax base is the last thing any state needs during this time of economic uncertainty.
Instead of looking for creative ways to levy new taxes, New Mexico officials could pursue efforts to better educate consumers about current tax rules. For example, California’s Board of Equalization has estimated that a letter campaign reminding taxpayers they may owe use taxes for Internet purchases will help revenue from these activities to grow to $183 million in 2011, $367 million in 2012, and $600 million annually by 2013. Alabama has tested a similar letter campaign with stunning success, including instances of taxpayers voluntarily sending the state checks for several thousand dollars.
New Mexico’s government faces fiscal challenges in the months ahead and needs to undertake reforms, especially reforms to its bloated state budget. The General Assembly need not, and should not, add to the complicated tax burden by imposing a new tax on online shopping through affiliate marketers. Therefore, our members hope you will reject SB 95.
CC: Governor Susana Martinez