Internet Sales Tax Bill Is “Raw Deal for Taxpayers”

WASHINGTON, D.C., Feb. 14, 2013 — Legislation introduced today to allow state tax collectors to reach across borders and tax out-of-state businesses would constitute a de facto tax on Internet sales and subject online retailers to taxation without representation, according to an analysis by the Competitive Enterprise Institute.

The legislation, known as the Marketplace Fairness Act, “would give state tax collectors alarming new powers to reach across their borders and audit retailers in every other state,” said Jessica Melugin, an  adjunct analyst at CEI.

“This may be a good deal for over-obligated state tax coffers, but it’s a raw deal for taxpayers,” Melugin said. “Projected revenues from expanded online sales taxes are less than 1 percent of total state and local revenues. It’s a lot of hurt for very little gain.”

Proponents claim these changes level the playing field, but that won’t be the case, Melugin said. “There’s nothing fair about allowing brick-and-mortar stores to continue to tax at the point of sale while forcing online retailers to calculate and remit to more than 9,600 distinct taxing jurisdictions. There are plenty of online retailers who won’t survive those compliance costs. The last thing a fragile economy needs is a small business killer like this.

“Every American should be concerned about state tax collectors reaching over their borders to impose tax law on businesses of other states—who have no political voice in that regime, do not benefit from the services those taxes fund and have little, if any, recourse against these tax officials.

“There are ways to make sales tax law more equitable, but this isn’t one of them,” Melugin said. “This is an effort pushed by big retailers such as Walmart, Target and Amazon to disadvantage entrepreneurs online.”

>> Read Melugin’s July 2012 study: “The Marketplace Fairness Act Would Create a State Sales Tax Cartel and Hurt Consumers“