(Alexandria, VA) – Different bills, same problems: that’s the assessment of the 362,000-member National Taxpayers Union (NTU), which for the second time in as many weeks weighed in with testimony to a Congressional committee warning of the dangers associated with legislation that would give Washington’s blessing to a new state tax collection regime for online retail sales.
In his statement for the record to the Senate Commerce Committee today, NTU Vice President of Government Affairs Andrew Moylan highlighted key problems with S. 1832, the so-called “Marketplace Fairness Act.” Moylan’s points (quoted below) are similar to those he made in comments last week to the House Judiciary Committee, which held a hearing on the Marketplace Equity Act (H.R. 3179):
Overturns Supreme Court Precedent. “S. 1832 would change current law by allowing states to enforce tax collection and remittance obligations on businesses regardless of physical presence. This would give states licenses to effectively substitute new sales tax requirements on businesses in the place of their current use tax systems.”
Dismantles Long-term Vital Taxpayer Safeguard: the Physical Presence Standard. “What the Marketplace Fairness Act would do is erase the physical presence standard for the purposes of remote retail sales (but of course maintain it for brick-and-mortar sales). The result…would be an abandonment of the limits on taxing powers that have served our federal system so well for decades – even centuries – on end.
“The bill’s authors are attempting to promise that its language strips away the physical presence protection only for sales taxes and not with individual or business income levies, for example… This is about as comforting to taxpayers as the claims from its inception that the income tax would apply single-digit rates to only the wealthiest of filers.”
Creates Distinctly “Unlevel” Playing Field. “Proponents of S. 1832 argue that their bill is intended to ‘level the playing field’ between brick-and-mortar and remote retailers, but in reality it would do the exact opposite. While the legislation would require remote sellers to collect sales tax on every item, it would force them to do so by a completely different and unequivocally harsher set of rules than exist for brick-and-mortar sales.”
“If the Marketplace Fairness Act were to pass, states could strong-arm remote sellers into complying with more than 9,600 separate sales tax jurisdictions across the country, each of which can issue its own unique set of edicts and definitions.”
Crushes Online Businesses with Compliance and Interstate Commerce Burdens. “The Marketplace Fairness Act essentially acknowledges its imposition of major expenses and complexity by including an exemption for businesses that have remote sales of $500,000 or less per year.
“Unfortunately, S. 1832’s paltry exemption level (the Small Business Administration threshold for defining a small business is $30 million in sales) … would do little to ease the suffering of smaller businesses.”
Moylan punctuated his testimony by criticizing S. 1832’s disastrous impact on businesses, and its potential to undo vital taxpayer protections as well as constitutional principles. He urged a shift in the discussion toward a “uniform origin-based sourcing” rule, as the better response to this evolving tax landscape.
The 362,000-member NTU is a nonpartisan, nonprofit organization working for lower taxes, smaller government, and economic freedom at all levels. More information on NTU’s work, is available at www.ntu.org.