Yesterday afternoon, the Senate Commerce, Science and Transportation Committee convened a hearing to discuss whether states have the authority to impose new sales tax collection burdens on Internet-enabled retailers. The U.S. Senate is considering a bill, S.1832, which would require small online retailers to collect and remit sales taxes in up to 9600 taxing jurisdictions nationwide. eBay strongly opposes any legislation that does not include a robust small business exemption and gives a small business the same tax burden as their larger competitor.
In addition to our statements of opposition, here are a few statements from others who are in opposition to S.1832:
Online retailers – large and small alike – cannot afford the economic hit that would come from a new sales tax from the Congress. Sales tax legislation that would overturn the Quill decision would impose a costly mandate on small businesses by requiring them to collect and remit sales taxes in thousands of tax jurisdictions across the country where they have no physical presence……… These efforts take us in the wrong direction at a time when our economy is still recovering and trying to create new jobs.
ERA urges Congress to protect electronic retailers from this new tax burden. Congress should support entrepreneurial efforts that create jobs and help stabilize the economy. Currently, electronic retailers are only required to collect sales tax from out-of-state customers only if they have a physical presence known as nexus. New and misguided remote tax burdens will devastate electronic retailers working to survive in these harsh economic times. Massive cost increases and new regulatory burdens will significantly damage the marketplace and the consumers who rely on it.
The title of this hearing characterizes imposing a tax collection mandate on online retailers as Marketplace Fairness. Yet online retailers and brick & mortar stores have distinct business models whose differences go beyond tax collection. It is hardly fair to not only to compare apples and oranges but also to force the oranges to become apples. The assumption that having online retailers collect sales taxes would result in a fair balance is overly simple.
It doesn’t matter what you call it, the Marketplace Fairness Act is a tax on Internet retailers at a time when they can’t afford it. These small businesses are doing everything in their power to succeed and Congress should be doing everything in their power to help them instead of trying every which way to add an additional burden.
The Internet is widely seen as an economic engine for small and medium sized businesses seeking access to new markets and we oppose any effort to undermine this model. Proposals like S. 1832 will make it more complicated and expensive to conduct commerce online for businesses and consumers.
Legislation forcing online sellers to collect sales tax for nearly 10,000 tax jurisdictions places unique, unfair burdens on Internet-based companies and should be repaired rather than rushed through Congress…This online tax bill would accomplish the exact opposite of creating ‘marketplace fairness’ by further tipping the competitive advantage in favor of big box retailers and the very largest of online sellers.
Congress has well-established Constitutional authority to regulate interstate commerce and related tax laws. However, with that tool in mind, it is critically important that Congress work toward lowering the tax burden and strengthening the physical nexus standard that was reaffirmed in Quill v. North Dakota. Unfortunately, the Marketplace Fairness Act and similar measures under consideration by Congress today would do the opposite.
The bright-line physical presence test in Quill should remain for collection of sales and use taxes without significant simplification reform of state sales tax regimes. The burden of each on interstate commerce is large, and this is a time when our economy can ill afford such a burden. DMA urges Congress both to uphold the physical nexus standard of Quill rather than extending taxing authority of states to include the collection of sales and use tax beyond their borders without significant simplification reform by the states.
The bottom line for taxpayers is still this: the Marketplace Fairness Act undermines basic taxpayer protections by eliminating the physical presence standard, imposes huge compliance and interstate commerce burdens, and does little or nothing to promote tax reform and revenue neutrality.
The issue of physical presence is perhaps the most important issue of the Internet age – is there any limit to government power or does the power of government now spread beyond the physical borders of a government entity, such as a tax authority, or is the power of government now limitless as the Internet means that any business anywhere can connect with customers in basically any governmental jurisdiction anywhere?