Virginia Republican Pushing Internet Sales Tax Letter
Rep. Scott Rigell (R-VA) 49% is circulating a draft letter for his House colleagues to sign encouraging Rep. Bob Goodlatte, chairman of the Judiciary Committee, the committee with jurisdiction on this issue, to take up and report out the Marketplace Fairness Act (MFA) of 2013 (S. 743).
The draft letter being circulated by Rep. Rigell states:
In representing these small businesses, we must do everything we can to ensure the government does not hinder their ability to thrive. We cannot stand by and watch the government, through outdated policy, continuously pick winners and losers. It is time we level the playing field and hold all retailers to the same standard that our brick-and-mortar small businesses comply with.
It absolutely correct that government policy should not pick winners and losers. But the MFA, rather than leveling the playing field, would instead only create new distortions and inequities by forcing internet-based retailers to comply with burdens that brick-and-mortar retailers do not have to face. The Heritage Foundation explains:
Supporters of [the MFA] argue that the current system disadvantages brick-and-mortar stores that compete with non-taxed Internet sales. But the proposed solution could create an even more unequal footing, with Internet-based retailers facing taxation from as many as 46 separate state tax authorities.
Not only would this burden hurt small businesses “ability to thrive,” contrary to its supporters’ stated intentions, but it would also be a form of potentially dangerous regulation without representation. Online businesses with no physical presence in the 45 states, the District of Columbia, and reservations that aren’t their own, would have no representation under these outside tax jurisdictions. The Heritage Foundation explains:
Right now, states can force only businesses that have a physical presence in their state — a store, warehouse, or plant — to collect their sales taxes. This long-existing standard originated from the Supreme Court’s ruling in the 1992 Quill case. This standard was sensible then as it is now.
In fact, Rep. Goodlatte (the intended recipient of this draft letter), understands this all too well, having stated in a recent hearing that “One of the most significant defects is that the bill exposes remote sellers to multiple audits in jurisdictions in which they have no voice. Legislators prefer to impose taxing burdens on those least able to hold them accountable…remote sellers have no direct recourse to protest unfair or unwise enforcement, making them prime targets.”
The true motivation for the MFA is to increase tax revenue for revenue hungry states and stifle online competition, not to ensure “fairness” for brick-and-mortar companies. Chairman Goodlatte should resist calls from misguided Representatives of either party who are seeking to grant states new and unprecedented taxing power.