Despite what some supporters claim, the Marketplace Fairness Act is bad news for conservative principles and the cause of limited government. It would dismantle proper limits on state tax collection authority while causing serious damage to electronic and interstate commerce.
MFA would countenance an enormous expansion in state tax collection authority by wiping away the “physical presence standard,” a baseline protection that shields taxpayers from harassment by out-of-state collectors. Current law dictates that a state can only require a business to collect its sales tax if it is physically present within its boundaries. Far from a “loophole” intended to advantage the Internet, it is the result of a Supreme Court decision grounded in a bedrock foundational principle of tax policy: states must not be allowed to extend their taxation and regulatory authorities beyond their borders.