Any business that goes online to find customers is finding themselves under siege by regulators and tax collectors from multiple states, despite Supreme Court rulings that limit states’ cross-border taxing powers.
This growing trend would also trouble our nation’s founding fathers, who designed Article 1 of the Constitution to stop the original colonies from imposing duties and trade barriers that favored their merchants over those from other colonies.
Two hundred years later, the Supreme Court relied on that constitutional principle to affirm that a state may only impose sales tax liability on businesses with a physical presence in that state. That’s why catalog and Internet retailers collect sales tax for states where they have a physical presence. And that’s why Amazon.com collects tax for every state now that they’ve opened distribution centers across the country.
But state tax collectors want all retailers to pay their sales tax, so they’ve been lobbying Congress to force even small online businesses to perform the bureaucratic gymnastics of collecting tax for more than 12,000 jurisdictions across 46 states.
My organization, NetChoice, has been battling state tax collectors for more than a decade. In 2013 Congress entered the fray when the Senate passed the Marketplace Fairness Act (MFA), which would empower states to impose their tax regulations on any business anywhere in the country. MFA then went to the House Judiciary Committee, which established seven commonsense principles for any cross-border expansion of state tax powers. Against those principles, Committee chairman Bob GoodlatteRobert (Bob) William GoodlatteFight breaks out between Jordan, Nadler over rules about showing video at Garland hearing The job of shielding journalists is not finished Bottom line MORE (R-Va.) scored the MFA as a failure on all counts.
Goodlatte then asked for alternatives to MFA. We presented a concept where states collect tax on all sales originating in their state, and then distribute revenue to the states where customers reside. That avoids forcing every business to answer to 46 differing state regimes for definitions, tax rates, rules, and audits.
That’s a concept that deserves to be explored further, but many states are bypassing Congress to expand their tax powers with a barrage of new state laws and regulations to harass remote retailers. We’ve been able to block some of these moves with lobbying and legal challenges, but the chaos in capitols and courtrooms is creating an unworkable patchwork of differing tax and reporting mandates.
We need to hit the PAUSE button on the states’ chaos campaign, to allow Congress to resume consideration of a definitive national solution for remote sales tax.
That’s precisely what Rep. Jim SensenbrennerFrank (Jim) James SensenbrennerProtecting the fundamental right of all Americans to have access to the voting booth Republicans compare Ron Johnson to Joe McCarthy: NYT GOP puts pressure on Pelosi over Swalwell MORE (R-Wis.) delivered to Congress last week when he introduced the No Regulation Without Representation Act of 2017. This bill codifies present federal doctrine by prohibiting states from imposing sales tax collection and reporting burdens on out-of-state businesses. States should not be allowed to regulate businesses beyond their borders, whether it’s a sales tax obligation, labeling mandate, or other regulatory restriction.
We urge Congress to take up the No Regulation without Representation Act quickly, to protect small businesses from unlawful state overreach that threatens entrepreneurs, consumers and our national economy.
Steve DelBianco is Executive Director of NetChoice, a trade association of e-commerce businesses. The views expressed are those of NetChoice and not the views of any individual member company.
The views expressed by this author are their own and are not the views of The Hill.