Heritage Action for America and Conservative Leaders Oppose the Internet Sales Tax

Heritage Action joins the Conservative Action Project, chaired by former AG Edwin Meese, as well as the CEO’s of over 100 organizations representing all major elements of the conservative movement to oppose the Internet Sales Tax and to call on Congress to reject the so-called Marketplace Fairness Act. 

Washington, D.C. — Current Event: On April 25, the U.S. Senate passed a key procedural vote to consider S. 743–the so-called Marketplace Fairness Act–nearly ensuring passage.  The bill expands the authority of individual states to cover out-of-state retailers, allowing them to force those retailers to collect sales taxes for them.  This is a dangerous extension of state power, violating core principles of federalism. At the same time, it subjects consumers, businesses, and entrepreneurs to thousands of state and local tax regimes. With Senate passage imminent, the House must reject this misguided bill.

Action: 

  • House Speaker John Boehner and Majority Leader Eric Cantor should not bring the Senate-passed bill directly to the floor.
  • Conservatives should reject any bill that expands the authority of out-of-state governments to regulate businesses with regard to online taxation.

Issue in Brief: 

The 1992 Supreme Court decision, Quill Corporation v. North Dakota, bars states from requiring a retailer to collect sales taxes on its behalf, unless that retailer has a physical presence in the taxing state.

For example, a company whose workforce and warehouses are in New Hampshire, and which has no contacts with Illinois other than taking remote sales orders over the Internet cannot be required by the state of Illinois to collect sales taxes from customers living in Illinois.

Under the Marketplace Fairness Act, the Quill standard would be eliminated, allowing states that meet certain minimal streamlining standards to require retailers in all states to collect taxes for them.

As a result, retailers would be subject to laws imposed by states with which they have no direct connection, and in whose political system they have no voice.  It is regulation without representation, allowing politicians to raise revenue, without fear of a public backlash.   The result would be added costs for retailers and American consumers, directly through the sales taxes imposed, but also through the added burden of collecting the taxes for the 9,600 separate taxing jurisdictions in the U.S., each with its own unique definitions, holidays, and rates.It is also unfair to require online businesses to collect and remit sales taxes from all their customers based on their residence but not to require brick-and-mortar businesses to do the same.  No such requirement should exist for any type of business.

A Congressional Research Service (CRS) report suggests the compliance burden associated with the bill would force businesses to set up shop outside of the United States, leading Sen. Ron Wyden (D-OR) to call the proposal the “Shop China Bill.”

Rather than pass this misguided legislation, Congress should pursue alternatives that encourage tax competition and preserve the American standard of geographical limits to tax authority.  As Rep. Jim Bridenstine (R-OK) said about the bill, “Taxes must be simplified not made more complex, reduced not expanded.”  We agree.

Signed:

David McIntosh

Former Member of Congress

Indiana

Mike Needham

CEO

Heritage Action for America

Grover Norquist

President

Americans for Tax Reform

Jenny Beth Martin

Co-Founder

Tea Party Patriots

Matt Kibbe

President

FreedomWorks

Tim Phillips

President

Americans for Prosperity

Brent Bozell

Chairman

For America

The Hon. George Allen

Former Governor and US Senator

Virginia

Tom Schatz

President

CCAGW

Duane Parde

President

National Taxpayers Union

David Bossie

President

Citizens United

Phyllis Schlafly

President

Eagle Forum

Eli Lehrer

President

R Street Institute

Heather Higgins

President

Independent Women’s Voice

Phil Kerpen

President

American Commitment

The Hon. Jim Ryun

Chairman

The Madison Project

Becky Norton Dunlop

Former White House Advisor

President Ronald Reagan

Bill Walton

Chairman

Rappahannock Ventures

The Hon. Ken Cribb

Former Domestic Advisor

President Ronald Reagan

Bob Reccord

Executive Director

Council for National Policy

The Hon. Ken Blackwell

President

Constitutional Congress, Inc.

Al Regnery 

Former Publisher

American Spectator

David Williams

President

Taxpayers Protection Alliance

Gary Aldrich

Chairman

CNP Action, Inc.

Chris Littleton

President

Ohio Rising

Katie McAuliffe

Executive Director

Digital Liberty

C. Preston Noell III

President

Tradition, Family, Property, Inc.

Wayne Crews

Vice President

Competitive Enterprise Institute

Christopher Malagisi

President

Young Conservatives Coalition

J. Michael Smith, Esq.

President

HSLDA

Fergus Cullen

Executive Director

Yankee Institute for Public Policy

Rebecca Hagelin

Columnist

The Washington Times

Maurice Thompson

President

1851 Center for Constitutional Law

David Y. Denholm

President

Public Service Research Council

Matt A. Mayer

President

Opportunity Ohio

Elaine Donnelly

President

Center for Military Readiness

Tommy Sears

Principal

Capital Enterprise Associates, LLC

Darian Rafie

Vice President

ActRight

Susan Carleson

President

American Civil Rights Union

John Dodd

President

Jesse Helms Center Foundation

Ralph Benko

Contributor

Forbes.com

Mike Stenhouse

CEO

RI Cntr. for Freedom & Prosperity

Seton Motely

President

Less Government

Paul Gessing

President

Rio Grande Foundation

Craig Shirley

Chairman

Citizens for the Republic

Richard Viguerie

Chairman

ConservativeHQ.com

Peter J. Thomas

Chairman

The Conservative Caucus, Inc.

Lew Uhler

President

National Tax Limitation Committee

Mathew D. Staver

Founder & Chairman

Libery Counsel

Joe Balyeat

Montana State Director

Americans for Prosperity

Jeff Mazzella

President

Center for Individual Freedom

Karen Kerrigan

President & CEO

Small Business & Entrepreneurship Council