CEI Responds to The Remote Transactions Parity Act

Today, the Competitive Enterprise Institute (CEI) responded to the introduction of the “Remote Transactions Parity Act of 2015” (RTPA)  by  Rep. Jason Chaffetz, (R-Utah). The bill would give unprecedented new powers to states, empowering them to reach across borders to tax businesses for sales made over the Internet.

CEI adjunct analyst Jessica Melugin said:

“Like its Senate cousin the Marketplace Fairness Act, Chaffetz’s new tax grab erodes healthy tax competition among states, puts consumers’ information at higher risk, and ushers in a regime of taxation without representation. It’s like the Blackwater of tax collection, state-paid mercenaries with sales tax charts. Under the Marketplace Fairness Act businesses are threatened by the prospect of being audited and prosecuted in every state into which they sell.

Chaffetz’s equally troubling alternative is using state-employed tax compliance agents. That’s like using an IRS agent to prepare your taxes. Just like the MFA, the Chaffetz RTPA is a tax grab by the states and political rent seeking by big business.  It would be much better to seek real fairness and preserve competitive, fiscally conservative principles through an origin-based solution in the remote sales tax debate.”

The bill touts protection from state audits for smaller businesses who have no physical presence in the state and under $5 million in gross receipts. But the reality is that a loophole in the bill gives states the authority to trigger audits despite this supposed protection. “Notoriously aggressive tax collecting states, like California and New York will surely render the RTPA’s so-called protections toothless,” notes Melugin.

 “Another worrisome aspect of the legislation is the rolling small seller exemption: the first year exempts businesses with more than $10 million dollars in gross receipts for combined remote and in-state sales in the previous year, the second year drops the threshold to $5 million dollars and in third and subsequent years it shrivels to $1 million dollars in gross receipts,” Melugin continued.  “If this tax scheme isn’t an unreasonable burden on businesses, why the need for an exemption at all?  What is less egregious about being taxed without any political recourse in three years as opposed to now?”

Related: Latest Internet sales tax bill gives states unprecedented taxing power