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Latest Internet Tax Scheme Violates Constitutional Taxing Principle, Demands Unprecedented Compliance Burden, Nation’s Oldest Taxpayer Group Testifies to Congress
For Immediate Release July 24, 2012
Douglas Kellogg, (703) 683-5700
Pete Sepp, (703) 683-5700
(ALEXANDRIA, VA) - Today, Vice President of Government Affairs for the 362,000-member National Taxpayers Union (NTU), Andrew Moylan, submitted testimony to the House Judiciary Committee criticizing the “Marketplace Equity Act” (H.R. 3179) as a flawed piece of legislation that will cripple established taxpayer protections, disregard decades of constitutional precedent, and harm already struggling small businesses.
“The Marketplace Equity Act is one of several deceptively-named bills in Congress that claim to ‘level the playing field’ in e-commerce even as they drag taxpayers and small businesses into a costly quagmire,” Moylan observed.
In his testimony, Moylan highlighted the major problems with the “Marketplace Equity Act,” commenting on the eradication of constitutional standards, and the broad damage the compliance burden would inflict on the economy.
“The physical presence standard is a strong protection from overzealous tax collection tactics and a fundamental safeguard in American tax policy, one that is broadly applied as the appropriate boundary which states must observe when asserting tax prerogatives,” said Moylan. He added physical presence is a well-understood restraint that exists with other taxes, like those on income.
NTU’s Vice President of Government Affairs also painted a dire picture if “remote-selling” businesses are forced to wrestle with rules in more than 9,600 separate sales tax jurisdictions. Online retailers would have to calculate a special tax rate based on the unique laws of each customer’s residence and remit a payment to a distant government entity. The compliance burden alone will force many businesses to throw in the towel. “Marketplace Equity Act proponents claim that there are modern software solutions to address these difficulties, but that is like saying that TurboTax has solved our mind-numbingly complex federal income tax code,” said Moylan.
Moylan also criticized those seeking new online tax collection schemes for exaggerating their hardship, noting that only about $7 of every $100 in retail spending occurs online at this time. Furthermore, many “Mom and Pop” businesses have gained from the advent of the Internet, including online consulting services, streamlined inventory management, and easier “B2B” transactions at the wholesale level.
Policymakers can address any legitimate concerns on this issue in more responsible ways, starting with an “origin-based” sourcing approach that resembles the standard that “Brick and Mortar” firms face. “Simply treating remote sales in the same way that we already treat brick-and-mortar sales today and devoting any additional revenue to tax rate reductions could level the playing field in an honest way without burying taxpayers in the process,” Moylan’s statement concluded.