The Internet empowers entrepreneurs to find consumers across the country and throughout the world, particularly empowering small and medium-sized businesses.

However, as local, state and the federal government look for ways to close budget gaps and raise revenue, some are seizing on the opportunity to target online sales.  Congress is now debating legislation that would require out-of-state retailers to collect sales and use taxes on purchases made to residents of their states — regardless of physical presence.

CCIA’s View:

CCIA has long opposed such legislation as burdening online vendors with the task of sorting through the policies of thousands of taxing authorities around the country, and serving as revenue collection agencies for each of them.  As innovation and entrepreneurship have always been the drivers of our economic growth, it is counterproductive to add to the administrative burdens of small businesses at the very moment we need them growing and leading our economic recovery.

There will be negative implications on the Internet if the relationship between taxes and physical presence is broken.  E-commerce has enabled businesses to broaden their scope beyond traditional geographical limitations.  Allowing states to impose geographically-based taxation collection requirements on e-commerce businesses would re-impose the very limitations that innovation has enabled them to overcome.  Indeed, since the broader the customer base, the more tax jurisdictions the business would have to collect for, so businesses would be in fact penalized for their success.  Good tax policy should promote and support new innovative business models rather than simply protect the old.

 

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