The Senate voted to pass S. 743, the
Marketplace Fairness Act yesterday. CCIA has
long opposed
this bill, which would impose burdensome tax collecting requirements on online
retailers regardless of physical presence. Especially disappointing about the vote was the fact that
the Senate decided to eschew substantive discussion about the consequences of
this action on the economy in favor of a simplistic declaration of
fairness. While state and local
tax jurisdictions continue to shy away from the necessary task of simplifying
their sales tax systems, proponents of the bill certainly have no such qualms
about oversimplifying the debate.
Even leading up to the vote last night, sponsors of the bill
continued to argue for “fairness” and “states rights.” These may seem like easy things to
support, but they are highly subjective and depend greatly on whose fairness
and rights are being considered.
The bill unquestioningly accepts the premise that online retailers and
physical retailers are equal in all ways except sales tax collection, and that
forcing online retailers to collect sales tax would complete the equation. This is inaccurate in that not only are
the two business models distinct in a host of different ways but the burden of
sales tax collection also differs between collecting for one location and
collecting across thousands of jurisdictions. Wishing away these differences in order to achieve a tidy
equation of “fairness” oversimplifies the treatment of e-commerce as a new
business model, and does not lead to a policy that works in the real
world.
The same can be said for the “states’ rights” argument. Proponents of the bill characterize
it as freeing states from having to ask, “Mother, may I?” to the federal
government in order to collect taxes for their own states. This is an oversimplification
portraying a conflict between all states on one hand and the federal government
on the other. In reality, “states’
rights” is not just about rights against the federal government but also rights
vis-à-vis other states. Issues
such as forcing online retailers in states with no sales taxes to collect for
other states, or enforcement and auditing action against online retailers
beyond a state’s borders have not been addressed.
Proponents also repeated the claim that the bill creates no
new taxes; that the taxes are already owed by online buyers. Yes, but the collection burden falls on
the shoulders of small online retailers.
The issue is not about tax burdens but about tax COLLECTION
burdens. Why must online retailers
be impressed into service as tax collectors for no better reason than that it
would be convenient for state and local tax authorities? Unable or unwilling to simplify their
tax systems to a manageable degree, they have decided to dump the unholy mess
onto the very innovative small businesses whose growth should be encouraged,
not undermined.
During floor debate, Sen. Wyden (D-Ore.) declared that the
bill “steers the Internet toward a dangerous path,” comparing it to demands by
certain foreign governments that the Internet should accede to their
control. This bill’s view of
technology and innovation as just another asset that can be commandeered for
government use is a disturbing one, and one hopes that it is merely a case of
not adequately taking into account its consequences.
While we are disappointed that the world’s greatest
deliberative body saw fit to rush passage of the Marketplace Fairness Act
through, we hope that the House of Representatives will take the time and care
that such a fundamental rethinking of taxation deserves rather than
perfunctorily accepting an oversimplified argument.
