“I think that gets to the root of what we’re saying,” NetChoice Executive Director Steve DelBianco told reporters April 27. He said a state imposing rates, rules and audits “needs to be a regime where I have a physical presence allowing me to have some say in my state government and in my regulations.”
Steve DelBianco is on the shameless side. He leads NetChoice, a national trade association representing e-commerce and online businesses.
“Massachusetts has this unique theory of electronic presence,” DelBianco said. “But under that theory, your business is subject to the taxation [and] regulation in any state where a user simply enters your website address. That can’t hold up to legal scrutiny, ’cause it certainly doesn’t hold up to common sense.”
For DelBianco, the only option left is a legal challenge to fight the idea that a cookie on your computer is the same thing as a storefront on Newbury Street. He said his group has sued a number of other states for online sales tax laws and he’s looking at a legal fight in Massachusetts too.
“We’re researching the legal arguments and raising the funds to pursue a lawsuit right now,” DelBianco said. He said it’s “too soon to say when we’ll be ready.”
There is no end in sight for legal challenges to state government efforts to tax remote sales. The latest involves a lawsuit that Bloomberg made available online, filed by NetChoice and the American Catalog Mailers Association.
If other states copy a South Dakota law, businesses would face sales tax audits from across the country and costly software changes.
Divide-and-conquer is a tried-and-true strategy to defeat a superior enemy. It works in war and in business, but perhaps nowhere more so than in politics. When it comes to online sales tax, state tax administrators and legislators managed to divide the retail business community in their drive to gain new tax powers at the expense of consumer choice and small business growth.