The bill is opposed by many online retailers, including eBay Inc. and Overstock.com Inc., that are represented by industry lobbying groups such as NetChoice.
Former-Rep. Christopher Cox (R-Calif.) — who testified on behalf of e-commerce trade group NetChoice — said tax calculation software such as the kind provided under the Senate bill “is free like a puppy” because it does not take into account integration costs.
“The way to level the playing field is to make sure that every business — brick-and-mortar or online — is required to do things the same way and follow the same rules,” said Chris Cox, a former Republican congressman and counsel to NetChoice, an advocacy group that represents EBay Inc., Overstock.com Inc. and other online sellers.
Chris Cox, a partner in Bingham McCutchen’s Costa Mesa, Calif., office who represents e-commerce group NetChoice, said the Marketplace Fairness Act wouldn’t level the playing field. He recommended that Congress take an approach he called “home rule and revenue return,” which would allow online businesses and their brick-and-mortar counterparts to follow only the sales tax rules of the states in which they are physically based.
“If [the Marketplace Fairness Act] were the only option, NetChoice would strongly prefer today’s system,” said Cox, who is a former U.S. Securities and Exchange Commission chairman and Republican congressman from California.
“Most would agree it is fundamentally unfair to force a local retailer, with only one place of business in a single state, to be subject to tax compliance burdens, including the requirement to appear in person to defend a lawsuit, in each of the 46 states that have sales taxes,” he said.
Former Rep. Chris Cox, now an advisor to NetChoice (online sellers). His testimony emphasized the importance of the existing constitutional standard, insist on meaningful simplification, and criticize the Marketplace Fairness Act and the Streamlined Sales Tax project.
But apps and other digital content like e-books and music are not really simply digital equivalents of books and CDs, says Steve DelBianco, executive director of NetChoice, a coalition of e-commerce firms like Yahoo, Facebook and AOL. Most downloads can’t be resold, gifted or traded, he says. Customers get a license for the digital files — but they don’t own them the way they own a book or CD. (Also see: Who inherits your iTunes library) States are grappling with this dilemma in different ways. New Jersey introduced a sales tax on e-books, music and even ringtones in 2006, but excluded video-on-demand. “States that want to tax digital movies are salivating at the thought of collecting those taxes from sellers that have no presence in their state,” he says.