Innovation Policy Post

On February 14, another version of the Marketplace Fairness Act was introduced in the House and Senate. Like its previous incarnations in past Congresses, this bill would give states the authority to require out-of-state online retailers to collect sales and use taxes on purchases made to residents of their states -- regardless of physical presence in those states. CCIA has consistently opposed such legislation as saddling small Internet retailers with the burden of collecting taxes across thousands of jurisdictions, and penalizing them for daring to utilize the Internet for a new business model. As supporters of this bill have described it in terms of “fairness” and “leveling the playing field,” let us examine how accurate this language is.

Last year, CCIA consistently opposed efforts to pass legislation that would force online retailers to collect sales and use taxes regardless of physical presence.  Last month, we opposed an attempt in the lame duck session to attach such a bill to the defense authorization bill.  In light of such back door efforts, as well as the stated determination by proponents in Congress to continue to push for legislation in the new Congress, we remain vigilant against any further attempts to misleadingly frame the issue as one of fairness and leveling the playing field.  One Reuters article in the aftermath of the holiday shopping season caused us concern by seeming to conflate Amazon.com, which is a retailer with both physical and online operations (“click and mortar”), and Internet retailers with no physical presence.  

On Dec. 6, the United States Senate voted to approve legislation extending permanent normal trade relations to Russia. Coming on the heels of the House vote last month, this action marked the final chapter in a Congressional debate over Russia and how to find a balance between trade promotion and human rights. Internet censorship is an issue with implications for both, and a digital trade provision in the PNTR legislation could be a first step towards utilizing trade enforcement to combat it.

Leesburg, Va. – As a round of negotiations on the Trans-Pacific Partnership begins, public interest groups are joining members of Congress in their call for more transparency of the key nine-country trade agreement that’s being billed as the 21^st Century Trade Agreement. Canada and Mexico are scheduled to join the next round of talks in December and the treaty is expected to cover broad trade provisions for nations that make up a third of the world’s economy.

The Senate Committee on Commerce, Science and Transportation held a hearing on “Marketplace Fairness: Leveling the Playing Field for Small Business” this month.  Unfortunately, the substance of the hearing had very little to do with the laudable title, as it dealt with the Marketplace Fairness Act, which would shift the burden of tax collecting requirements to online retailers regardless of physical presence.  In contrast with other senators on the committee who seemed to accept the premise that it was somehow fair to impose a tax collection mandate on small online businesses over thousands of tax jurisdictions, Sen. Jim DeMint (R-SC) and Sen. Kelly Ayotte (R-NH) demonstrated their understanding both of the compliance burdens such a mandate would entail, and also of the value of different business models.  

CCIA was pleased to learn senators added provisions to better protect digital goods ahead of the U.S. Senate Finance committee markup a bill today to permanently normalize trade relations (“PNTR”) with the Russian Federation and Moldova. CCIA issed a news release asking for better trade protections online after the Russian parliament’s vote to blacklist websites and allow them to be shut down.

As Matt Schruers writes in his blog post for CCIA's DisCo Project, "One aspect of the proposed mark-up that merits attention is that it would require the USTR to report on barriers to digital trade in Russia.  The bill achieves this by amending an existing international review process – the Trade Act of 1974’s so-called “Special 301” review– to also identify “laws, policies, or practices” that “deny fair and equitable treatment to U.S. digital trade.” For more please see his complete post: 

CCIA has grave concerns about legislation passed yesterday by the Russian Parliament that would establish a blacklist of websites that government could shut down, and hopes U.S. trade officials weigh this development. While the legislation is ostensibly targeted at child pornography and sites promoting suicide or substance abuse, the establishment of a government blacklist framework is a severe blow to Internet freedom and could be the first step on a path that leads to complete censorship and control of online information by an increasingly authoritarian Russian government.  

Last week, the House Judiciary Committee passed the Manager's Amendment of H.R. 1860, the Digital Goods and Services Tax Fairness Act, by voice vote.  The bill establishes a national framework for how state and local taxes apply to digital goods and digital services so as to prevent multiple and discriminatory taxation.  CCIA welcomes committee passage of this legislation as we believe it recognizes the importance of innovation and the need to provide for the continued development of the growing digital marketplace.  

The Senate Finance Committee held an April 25th hearing on “Tax Reform: What It Means for State and Local Tax and Fiscal Policy.”  Within the broader theme of the hearing, there was a lively exchange on the issue of online sales tax collection that illustrated supporters’ misperceptions regarding the compliance burden for small online retailers.  

The Internet is fundamental to this country’s economy, the media, security, education, and basic human rights, just to name a few.  The SOPA blackout on January 18, 2012 and its aftermath demonstrated participating websites’ commitment to balanced IP policy and the reliance of this country on these online resources.  Similarly, there has been growing backlash—particularly abroad—to international agreements like the Anti-Counterfeiting Trade Agreement (ACTA) and the Trans-Pacific Partnership trade agreement (TPP).  These initiatives at one point seemed inevitable, and many may celebrate if the ACTA agreement ultimately fails.  A better metric for success on these and future trade agreements, however, is whether all stakeholders have a say in a transparent, participatory process.

Today, CCIA sent letters to the United States Trade Representative (USTR) expressing our desire to see Canada, Japan and Mexico’s unconditional participation in the Trans-Pacific Partnership (TPP) talks.  

As three of our four biggest trading partners, Canada, Japan and Mexico’s inclusion in the TPP is essential to ensuring our biggest trading partners are operating under the same “high standard” trade framework.  Besides the obvious gains to be won in further liberalizing trade in these huge markets, having these major trading partners all operating under the same or similar rules would reduce red tape and enhance efficiency.

Online taxes has become a focus on Capitol Hill with various competing bills and last week the House Judiciary Committee held a hearing on “Constitutional Limitations on States’ Authority to Collect Sales Taxes in E-Commerce.”  CCIA member eBay’s Vice President and Deputy General Counsel Tod Cohen was among those testifying before the Committee.