Washington, DC, August 1, 2001 – In testimony presented today to the Senate Committee on Finance, Competitive Enterprise Institute Director and American Enterprise Institute Scholar Michael Greve urged Congress to adopt a consistent approach to regulating electronic commerce in which purchases would be taxed only at their point of origin. Currently, taxes for interstate sales are based on the purchaser’s, not the seller’s, jurisdiction – thus subjecting companies to tax collection and remittance obligations in thousands of different jurisdictions.<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />
“The choice between origin (the seller’s end) and destination (the customer’s end) as the basic principle for e-commerce taxation has broad applications in other arenas—consumer privacy and international trade matters, for example,” said Greve. “In those arenas, the choice of the wrong jurisdictional principle—destination—would entail terrible consequences. In that light, I urge Congress to refrain from hasty e-tax legislation that might set a bad precedent and preclude a shift to origin-based taxation in the future.”
Taxing purchases only in the seller’s home state (the point of origin) provides a wide spectrum of benefits to all players. Businesses benefit through streamlined bookkeeping, small business in particular through lower barriers to entry in the market, consumers through lower prices, and state officials benefit by avoiding a federal take-over of taxing authority.
CEI president Fred L. Smith has explained as early as 1999 the historic U.S. commitment to “No taxation without representation,” and its application to consumers who are being taxed by state and local governments in which they have no voice through destination-based tax law. An e-commerce tax system that seeks to collect from scattered customers across the nation is not merely inefficient but ultimately incompatible with the history and legal traditions of the United States.
Michael Greve’s testimony before the Senate Finance Committee is available directly via the web at: www.cei.org/RemarksReader.asp?ID=1594. Fred L. Smith’s testimony before the Advisory Commission on Electronic Commerce is available directly via the web at: www.cei.org/RemarksReader.asp?ID=1595.
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