Senate Should Pass Clean Extension of Internet Tax Moratorium

July 17, 2014

On Tuesday, the House of Representatives passed the Permanent Internet Tax Freedom Act by voice vote.  CCIA has supported making permanent the moratorium on Internet access taxes and on multiple or discriminatory taxation of e-commerce, as it would enable the continued growth of the Internet economy.  The House has now done its part to address the need to extend the moratorium before it expires on November 1.  However, this being the Congress we have all come to know and love, on the very day that this common-sense pro-innovation measure was passed, a group of Senators proceeded to rain on the House parade by introducing a bill that links the moratorium extension to the controversial issue of online sales tax collection.

In addition to passing the House by acclamation, permanent extension of the Internet access tax moratorium has broad support in the Senate, with 51 co-sponsors for the Senate’s Internet Tax Freedom Forever Act.  This is an issue with broad bicameral and bipartisan support.  Yet, an obstacle has been introduced in the form of the Marketplace and Internet Tax Fairness Act (S. 2609), which combines a 10-year extension of the moratorium with the Marketplace Fairness Act (MFA), which would force online retailers to collect sales and use taxes regardless of physical presence.  Senate Majority Leader Harry Reid has expressed support for this combination bill.  While the Senate did pass the MFA in May of last year (entirely bypassing the committee of jurisdiction), the House has not seen fit to take it up.  Stymied in the House, MFA proponents are now pushing an unholy concoction that links two bills that represent polar opposites in their approach to innovation.  Continuing to keep the Internet free of access taxes would promote continued broadband adoption and ensure the future development and success of e-commerce and the digital economy.  In contrast, the MFA forces online retailers to bear the burden of tax collection, penalizing them for daring to innovate beyond the current tax system.

Linking these two distinct issues is an exercise in legislative hostage taking.  To paraphrase Isaac Asimov’s “Violence is the last refuge of the incompetent,” legislative linkage is the last refuge of the unconvincing.  Having failed to convince the House to take up the MFA, proponents are holding a gun to the head of the Internet tax moratorium to get what they want.  If one has a legitimate claim to something, one usually does not need to engage in blatant coercion.  Furthermore, by attaching a bill already passed by their own chamber to a separate bill, Senate MFA proponents are all but telegraphing their admission that they cannot get it enacted through a regular process.

The Internet tax moratorium is too important to fall victim to such legislative shenanigans.  The Senate should take up and pass the Internet Tax Freedom Forever Act and make the moratorium permanent before the November 1 deadline.

Related Articles

House Judiciary Subcommittee Holds Hearing on Taxes and “Nexus Issues”

The House Judiciary Committee’s Regulatory Reform, Commercial and Antitrust Law Subcommittee held a hearing on three bills Tuesday regarding nexus and taxation: the Mobile Workforce State Income Tax Simplification Act, the Digital Goods and Services Tax Fairness Act and the Business Activity Tax Simplification Act. In particular, as part of the Download Fairness Coalition (DFC),…

Online Retailers Could Be Hobbled in Lame Duck

In July, we warned against the short-sighted folly of conflating the issues of the Internet access tax moratorium and online sales tax collection, characterizing the then newly introduced Marketplace and Internet Tax Fairness Act (S. 2609) as an exercise in legislative hostage taking. Unfortunately last week, Senate Majority Leader Harry Reid (D-NV) expressed (in both…

Problems with Marketplace Fairness Act Still Need to be Addressed

Last Friday, during the Vote-O-Rama on the Senate’s FY 2014 Budget Resolution, the Senate voted to approve an amendment offered by Sen. Dick Durbin (D-Ill.) regarding the online sales tax issue. Sen. Durbin announced “75 U.S. Senators showed their support for the Marketplace Fairness Act of 2013,” and characterized the amendment as “an amendment summarizing the bill.” Many…