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Press Release


Senate Bill to Unleash Internet Tax Collectors Would Still Bite Small Businesses & Muzzle State Tax Competition, Citizen Group Warns

For Immediate Release November 9, 2011
Pete Sepp, (703) 683-5700

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(Washington, DC) – Those who hear a familiar bark from an Internet tax-collection bill unveiled today by Senators Mike Enzi (R-WY) and Lamar Alexander (R-TN) will be in store for a bite as well, according to the 362,000-member National Taxpayers Union (NTU). Though it varies in certain respects with the “Main Street Fairness Act” (MSFA) first introduced by Senator Richard Durbin (D-IL, who also supports the Enzi-Alexander bill), the new “Marketplace Fairness Act” (MFA) still carries the threat of harming the economy and suppressing beneficial tax competition among states. NTU Executive Vice President Pete Sepp offered the following statement in opposition to the bill:

Supporters of the Marketplace Fairness Act might claim their bill is a breed apart from the Main Street Fairness Act, but those Americans on the receiving end of this legislation’s teeth will still feel serious pain. For one, the MSFA would allow revenue-hungry politicians to form a predatory pack called the Streamlined Sales and Use Tax Agreement; the Enzi-Alexander MFA would require each state to travel with that pack or meet some conditions for scavenging rights to pick over the bones of businesses outside their normal taxing territory. Neither bill provides adequate small-firm protections against tax collection liabilities on remote sales, which can’t simply be brought to heel with ‘free’ compliance software. Neither properly recognizes the variety of taxes that online retailers already pay – as well as the tremendous benefits the Internet gives small firms to keep their overhead low and their marketing visibility high. In any case, how is it ‘fair’ to let costly multistate obligations like these (which don’t bedevil pure ‘brick and mortar’ establishments the same way) chase after Internet-based businesses?

Worst of all, however, is that the MSFA would begin to devour the system of tax-policy competition among states that has served our country so well. Though its latest successor, the Enzi-Alexander MFA, offers an advisory clause that higher revenues from new collection obligations should be used to reduce tax rates, taxpayers can be forgiven for worrying that once the money starts filling state coffers, it won’t be coming back.

Designing a truly revenue-neutral system that shields small sellers from harsh compliance costs will take more comprehensive protections and reforms than MFA or MSFA can possibly offer. One step to explore would be requiring all firms to collect sales taxes only for the jurisdiction where they’re based, rather than for multitudes of governments around the country. Another would be supporting Senate Resolution 309 from Senators Wyden (D-OR) and Ayotte (R-NH), which affirms Congress’ intent not to give states ‘the authority to impose any new burdensome or unfair tax collecting requirements on small Internet businesses.’ Whether proposed as stand-alone legislation or part of a ‘Supercommittee’ package, the MSFA or the MFA would hinder rather than help small-business job creation. Their barks and bites may be different, but taxpayers know both these two ‘dogs’ could hunt down and hurt our chance for an economic recovery. Elected officials must do better.

NTU is a nonpartisan, nonprofit citizen organization founded in 1969 to work for lower taxes, smaller government, and economic freedom at all levels. The group was among the first to support the federal Internet Access Tax Moratorium and oppose the states’ Streamlined Sales and Use Tax Agreement. Note: For more on NTU’s work in this and other public policy areas, visit www.ntu.org.