“States should not be allowed to regulate businesses beyond their borders, whether it is imposing sales tax obligations, labeling, or other regulatory restrictions and mandates on business that are not located within their borders,” Steve DelBianco, executive director of NetChoice, said in a statement. “Congress must step in to stop this madness.”
“We urge the full House to quickly take up this measure to provide small and mid-sized retailers protection from unlawful state policies that threaten to harm consumers, businesses and our national economy,” he added.
“Consumers and online retailers around the country are under assault by more than a dozen states seeking to adopt onerous and unworkable sales tax collection regimes, but Rep. Sensenbrenner’s commonsense bill would put a stop to the chaos,” DelBianco said. “Whether it’s invading consumer privacy through tattletale reporting laws or establishing dubious ‘economic nexus’ policies that flout established Supreme Court precedent, this state sales tax feeding frenzy must be stopped in order to preserve consumer choice and competition.”
The trade associations, NetChoice and ACMA, filed a lawsuit against the Massachusetts regulation.
“For over a decade we’ve had a debate about how states can collect remote sales tax,” Steve DelBianco, executive director of NetChoice, told Bloomberg BNA in a June 5 email. “Meanwhile, Congress reached an overwhelming national consensus that President Obama quickly signed into law last year—the Permanent Internet Tax Freedom Act. But this Massachusetts regulation is completely at-odds with the key proviso of that law, which prohibits taxes designed to discriminate against Internet activity.”
However, NetChoice will argue in its lawsuit that case law has established that businesses need to have a physical presence in the state in order to collect that state’s sales tax. Saying anyone with a website can be taxed and regulated by every state where a resident can request that website is a legal overreach, DelBianco said.
“That’s like saying that any business with a telephone can be taxed by any state where a caller can simply dial the number,” he said.
Furthermore, DelBianco said the directive sets a bad precedent for websites that are based in Massachusetts, like Potpourri, Chadwicks, and Wayfair Inc., whose business could be harmed if other states follow Massachusetts’ lead. Wayfair is party in the litigation challenging South Dakota’s digital tax statute.
“This unprecedented regulation could come back to haunt Massachusetts companies when other states retaliate in kind,” he said.
“We’ve developed compelling legal arguments and plan to seek an injunction before this law goes into effect,” said Steve DelBianco, executive director of NetChoice, which represents Overstock.com, eBay, PayPal and other e-commerce businesses.
“The state doesn’t have the legal authority to tax businesses that don’t have a physical presence within the state,” he said. “Courts have consistently blocked such attempts.”
DelBianco said the rules would have a “boomerang effect” on Bay State retailers and consumers, who would be obligated to pay sales taxes on out-of-state transactions.
“That means every Massachusetts business that simply creates a website would find itself subject to the taxation and regulation of every other state,” he said.
“It’s a novel approach, but a blatant violation of that act,” DelBianco said.
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