Senate's Latest Move toward Internet Tax Scheme Threatens to Trample Economy, Constitution, Citizen Group Says


(Washington, DC) – By voting last night to rush passage of a controversial Internet tax scheme, Senate backers of the deceptively-named “Marketplace Fairness Act” (MFA) drew harsh criticism from the 362,000-member National Taxpayers Union (NTU). The Senate has invoked cloture on MFA, setting the stage for an up-or-down vote that the citizen group and its allies are seeking to defeat by mobilizing grassroots opposition.

“Senators racing to enact Internet tax legislation should pay closer attention to what they’re trampling underfoot in the process – taxpayers’ rights, small businesses, and the U.S. Constitution itself, to mention just a few,” said NTU Executive Vice President Pete Sepp. “It doesn’t have to be that way. The Senate could instead live up to its reputation as a deliberative body and hold hearings on thoughtful alternatives to the deeply flawed MFA.”

Among these options would be “origin-based sourcing,” which provides that all businesses, whether “brick-and-mortar” or online, collect and remit sales taxes to the jurisdiction in which they are located. MFA would instead subject only Internet (and catalog) retailers to a tax collection regime involving as many as 9,600 taxing entities. NTU warned Senators prior to the vote that:

The bill would hinder tax competition among the states, and may even encourage governments to “round up” their levels. The Supreme Court’s Quill ruling has prevented state tax collectors from aggressively reaching across their borders, but MFA would overturn this important protection against abuse of power. The bill’s attempt to carve out a sales-tax only exception to this ruling likely won’t survive long, and the way would be paved for state administrators to gain authority over other taxes.

Sepp noted that concern about MFA – already strong in the free-market community as evidenced by a coalition letter last week from 18 prominent groups – has been growing as more Americans become aware of its potential harms.

“Everyone from homeschoolers to financial services firms are asking hard new questions about the Marketplace Fairness Act that call for more than just soft fuzzy rhetoric about ‘Main Street,’” Sepp concluded. “Self-described fiscal conservatives in the Senate who have supported this bill so far must now stand up for taxpayers and demand a more thorough examination of the consequences of this legislation. If they won’t exercise such leadership, it will be up to principled lawmakers in the House of Representatives to do so.”

NTU is a nonpartisan citizen organization founded in 1969 to work for lower taxes and limited government. 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