From Slogans to Solutions: Doing the Real Work on Internet Taxes

It’s gonna take more than sloganeering and one-sided arguments to address the enormous challenge of reforming federal and state tax systems. That was the key message coming out of today’s Senate Finance Committee hearing on tax reform, and it’s one that advocates of the so-called “fairness” internet tax would do well to heed.

Committee Chair Max Baucus (D-MT) and Ranking Member Orrin Hatch (R-UT) did a good job of highlighting the insane complexity and uncertainty of current state and federal tax systems.  And Sen. Hatch also quoted a favorite slogan of his, reminding tax reformers to follow the Hippocratic principle, “First, do no harm”.

Internet sales tax proponents have plenty of their own slogans, too, as in “Fairness!” and “Level the Playing Field!”   But their solutions would harm millions of businesses who are using the internet to reach customers around the country, as they struggle to compete with the big-box chains that dominate local retail.  So much for the “fairness” slogan coming from billion-dollar retailers like Walmart and Target. Read more


Colorado’s Tax Turnover

We got a Rocky Mountain high after hearing news that the U.S. District Court for the District of Colorado upheld Article 1 of the Constitution and struck down one of the most noxious state tax grabs in recent history.

The Colorado Use Tax Reporting Regime was enacted in February 2010 and promptly earned a top spot on the iAWFUL list.  The bill would have required state retailers to mail both consumers and tax enforcers a list of online purchases made in the calendar year.

Beyond the onerous and expensive compliance costs associated with this bill, the creep factor was shockingly high. Read more


Pennsylvania Governor Delays a Tax Policy That Could Stop the Presses

With only a couple of days to spare before the state unleashed its tax collectors to trample Constitutional and Court protections for interstate commerce, Pennsylvania’s Governor delayed the imposition of sales tax demands on retailers with no presence whatsoever in the state.  Had this tax grab not been delayed, it would have threatened the livelihood of reporters and struggling media outlets across the Keystone State.

Back in December, the Pennsylvania Department of Revenue issued a “clarification” that imputes physical presence for any out-of-state retailer who places any paid advertisement with any Pennsylvania media publisher.  That includes all local newspapers, magazines, TV, and radio stations, and Internet websites.

Pennsylvania tax collectors claimed that any ad placed with a state media publisher creates a physical presence for the advertiser.  The new tax grab didn’t require that the ad be commission-based or that the publisher do any kind of “solicitation.”  There was not even a dollar threshold for annual sales, so this rule would have covered even an occasional advertiser who serves Pennsylvania customers.

With this rule, Pennsylvania was set to go further than any other state to expand the meaning of physical presence — which limits how states can impose tax collection burdens on remote businesses.

Read more


WSJ readers weigh-in: After seeing both sides, it’s a Landslide

Every once in a while, a rigorous debate will actually sway public opinion.

Yesterday,  the Wall Street Journal published an impressive special section on tech issues that featured arguments from both sides. And it included a debate over new sales tax requirements for online retailers.

As I described yesterday, The Journal also published survey results based on a poll conducted weeks earlier, so there were already over 2,000 votes (60%) for the position that retailers should have to collect sales tax for all states — even where they have no physical presence.

I was initially troubled that the survey results were compiled before readers had a chance to understand both sides of the argument. But then, within one day of seeing both sides presented, the poll results were reversed. Read more


NetChoice debates new online taxes in the Wall Street Journal

Today’s Wall Street Journal features a full-page debate (p.B5) on whether retailers should be forced to collect sales tax for all states — even where the business has no physical presence.

The article includes a debate between Michael Mazerov, who wants force all online sellers to collect taxes for all states, versus my argument in favor of the present national standard established by the Constitution and Supreme Court rulings.

Take a few minutes to compare the arguments.  And if you agree that the physical presence rule is the best way to preserve e-commerce as an opportunity for small businesses, please vote in the WSJ online poll.  (this morning’s printed poll results came over the last several weeks — before this debate was published ). Read more


The Taxman Doth Protest Too Much

It’s a common refrain that those who protest too much might have much to hide.  Wednesday’s introduction of the “Marketplace Equity Act” (MEA) is a prime example of this behavior.  Just like the  Mainstreet Fairness Act before it, the MEA’s name has little to do with its true implications.

At a breathless Capitol Hill press conference, advocates for a new Internet sales tax regime exclaimed the benefits that an ill-defined, expansive and costly regulatory system would have for small businesses.

Not surprisingly, Walmart – a key advocate for online sales taxes and a significant constituent for bill sponsor Rep. Steve Womack (R – Ark.) – ceded the stage to a handful of small business owners who spoke admirably about the creation of a pseudo IRS. Read more


California Stays the Decimation of California Affiliates

Like all stays of harm, this past week in California was a mixed-bag for California’s small “affiliate advertisers” (websites who host advertisements on their site on behalf of retailers): you breath a sigh of relief but are quickly reminded the delay is temporary.  For California affiliate advertisers, this came in the form of a one-year delay in forcing out-of-state small businesses to collect and remit taxes to California if their only physical presence is through affiliate advertisers.

So what happened and why is this a mixed-bag? Read more

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iAWFUL: the 10 Most Awful Laws for the Internet

Today we published our September 2011 “iAWFUL” list of bad Internet laws.  The worst offenders are new burdens on small businesses using the Internet, plus a Puerto Rico bill restricting how 17-year-olds can use social networking.

Our Internet Advocates’ Watchlist For Ugly Laws (yep, iAWFUL is an acronym) is the 10 items of state and federal legislation that pose the greatest threat to the Internet and e-commerce. Read more


Odd Timing to Promote ‘Fairness’

Youu can tell a lot about whether a lawmaker is proud of a bill by watching how and when they introduce it. If you’re at a big press conference in the morning, early in the week, with lots of reporters around, you can be pretty sure the lawmaker behind the bill feels pretty good about it.

So what does it say about the so called “Main Street Fairness Act” that Sen. Richard Durbin (D-IL) and Rep. John Conyers (D-MI) chose to slip the measure into the legislative agenda on a Friday afternoon, at the end of July, right in the middle of an apocalyptic congressional battle over the debt ceiling?   Read more


Maryland’s Attempt To Hunt New Tax Revenue Without Shooting Itself In The Foot

Basic hunting safety has two rules:

1.Know how to handle a gun without hurting yourself, and

2. Ready, Aim, then Fire.

Same rules ought to apply when states go hunting for new tax revenue. Lawmakers first need to understand where potential tax revenue is hiding and how to get it in their sights. Then they create legislation that minimizes collection costs. Read more