Will America ever be okay with an Internet Sales tax? The answer to that question is ‘it’s highly unlikely.’ Remember, according to a recent poll commissioned by R Street and the National Taxpayers Union, 57 percent of likely voters opposes a federal Internet sales tax legislation, including 66 percent of Republicans.
Yet, proponents of the Internet Sales Tax are claiming new momentum in the House of Representatives for an Internet Sales Tax bill. So what would it take to make an Internet Sales Tax palatable to American voters? This week, House Judiciary Chairman Bob Goodlatte (R-VA) released seven principles to guide his committee in drafting their own version of the so-called Marketplace Fairness Act, which the Senate passed in May on a “lopsided vote.”
Last week, a gathering of conservative lawmakers and conservative groups including Heritage Action’s CEO Michael Needham discussed why the misnamed Marketplace Fairness Act, better known as the Internet sales tax (IST), is a terrible idea and should not even be considered by the House. This conservative position was amplified by a fresh Gallup poll showing an overwhelming majority of Americans (57% to 39%) would vote against an Internet sales tax.
As you dig into that data even further, you quickly notice 18-29 years old are against the IST by a margin of 73-27. Gallup notes in their analysis that “If Republicans in the House oppose the Internet sales tax bill, that may help the GOP’s appeal to younger Americans, a key demographic in the party’s plan to build support before the 2014 and 2016 elections.”
At the press conference on Tuesday, our CEO Mike Needham and Senator Ted Cruz (R-TX) spent time highlighting a generational gap that Heritage Action noted from the Senate approval of the Internet sales tax in May. All seven Republican Senators age 50 and under voted against the Marketplace Fairness Act: Kelly Ayotte (R-NH), 44; Ted Cruz (R-TX), 42; Jeff Flake (R-AZ), 50; Mike Lee (R-UT), 41; Rand Paul (R-KY), 50; Marco Rubio (R-FL), 41; Tim Scott (R-SC), 47.
Catesby Jones is a small business owner who is sharing his story and telling us why he is so concerned about the Internet sales tax. Jones owns a company called Peace Frogs that is based in Virginia. But it is the Internet that makes his business possible. He calls the Internet sales tax “an attack on small businesses like mine.”
We have made several arguments against the Internet sales tax. Small businesses would have to comply with America’s 9,646 different taxing jurisdictions and to collect and remit taxes in 46 states. Small businesses like Peace Frogs do not have the administrative resources to comply with these burdensome regulations.
This tax would also undermine the principle of federalism and would grant states the authority to force online retailers (with online sales over $1 million per year) to collect sales taxes for states in which they have no physical presence. Heritage explains:
Abandoning the physical presence standard would be an egregious violation of basic principles of federalism, because it would allow states to expand their power to tax and to regulate beyond their borders.
Jones and other small business owners who depend on the Internet for their success will be harmed by the Internet sales tax. This bill — though it is called the Marketplace Fairness Act — is anything but fair.