BNA Bloomberg – Bill Reintroduced in Congress to Ban Digital Sales Taxes

BNA Bloomberg – Bill Reintroduced in Congress to Ban Digital Sales Taxes

“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.”

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WWLP Boston – Trade associations sue Massachusetts over internet sales tax

WWLP Boston – Trade associations sue Massachusetts over internet sales tax

The trade associations, NetChoice and ACMA, filed a lawsuit against the Massachusetts regulation.

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Forbes - Massachusetts Sued Before New Internet Sales Tax Rules Take Effect

NetChoice and ACMA are challenging Directive 17-1 as “unconstitutional on its face.” Among other things, the plaintiffs allege that the regulation “imposes an obligation on certain Internet vendors to collect and remit sales or use tax on electronic commerce that are not imposed on other vendors who do or might make sales of similar goods and services through some other means.” Those other means may include catalog, mail order, television infomercial, and toll-free telephone call.

NetChoice Executive Director Steve DelBianco said, about the lawsuit, “The Massachusetts regulation blatantly violates Supreme Court precedent and the Internet Tax Freedom Act, a law Congress enacted specifically to stop states from imposing taxes that discriminate against the internet.”

DelBianco says, however, that “Massachusetts is taking the position that an out-of-state business is effectively setting up shop in the computers and smartphones of residents who enter the website address of that business. One wonders why the state didn’t say the same thing about businesses with telephone numbers that were dialed by Massachusetts consumers over the last 75 years.”

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POLITICO - Morning Tax: It's a Lawsuit

IT’S A LAWSUIT: NetChoice, one of the more active groups in opposing giving states broader powers to tax out-of-state online retailers, filed suit Friday to stop a new rule that would do just that in Massachusetts, as your Morning Tax author noted. The Massachusetts regulation seeks to pass the physical presence test currently required by the Supreme Court’s 1992 Quill ruling by maintaining that smartphone apps or web browser cookies are a physical presence. That’s laughable, NetChoice argues, in addition to running afoul of the Internet Tax Freedom Act.

Couple other things to note here: Other states that have pushed the envelope on online sales tax collection, notably Alabama and South Dakota, have basically agreed that their laws run counter to the current Supreme Court precedent — in order to hopefully allow the high court to reexamine that current precedent more quickly. Massachusetts didn’t do that, according to Steve DelBianco, NetChoice’s executive director. On top of that, retail advocates were pretty loud cheerleaders for the Alabama and South Dakota laws, but have been noticeably quiet on this Massachusetts directive.

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Boston Globe - E-commerce group sues Baker administration over plan to tax online retailers

“State tax collectors must have been working in a dark basement in Boston, since they developed and adopted this regulation without public comment or even a single public hearing,” NetChoice executive director Steve DelBianco said in a prepared statement. “Our lawsuit brings all this into the open, and we believe a little sunshine will expose the legal flaws and unintended consequences on Massachusetts businesses.”

NetChoice also argues that the directive violates a 1992 US Supreme Court decision known as “Quill” that requires an out-of-state seller to have a physical presence in a state to be responsible for collecting sales taxes.

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Law 360 - Mass. Sued Over Sales Tax Rule Targeting Online Vendors

The American Catalog Mailers Association and NetChoice, a coalition of consumers and online retailers, sued the Massachusetts revenue commissioner in state court over a directive compelling large, out-of-state internet retailers to collect and remit sales and use taxes from Massachusetts

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Boston Business Journal - Baker administration sued over plan to tax online sales

Soon after the directive was announced, the e-commerce trade association NetChoice threatened that the administration would face litigation challenging its legality. The group followed through on that threat today in a Suffolk County Superior Court lawsuit that it brought alongside the American Catalog Mailers Association.

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BNA Bloomberg – Massachusetts Online Sales Tax Moving Toward Lawsuit

BNA Bloomberg – Massachusetts Online Sales Tax Moving Toward Lawsuit

“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.

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BNA Bloomberg - Minnesota Marketplace Law Ripe for Legal Challenge

Steve DelBianco, executive director of the e-commerce trade association NetChoice, said his policy staff is already reviewing legal options for a court challenge. NetChoice is party to litigation pending in South Dakota and Tennessee over their “economic nexus” regimes that require remote retailers satisfying a specified threshold of in-state sales to collect and remit sales tax.

“Think about the nonsense of a law that would require a shopping mall to be liable for the sales tax on purchases made at stores in the mall,” DelBianco told Bloomberg BNA. “If that sounds absurd, then you understand why this online marketplace law cannot stand up to legal scrutiny or common sense.”

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Newburyport News – Online sales tax plan faces challenge

Newburyport Daily News – Online sales tax plan faces challenge

“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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