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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.  Then, and only then, should they pull the trigger and create new tax law.

On Tuesday, Maryland took the first step in hunting safety by holding a hearing on whether and how to hunt for new tax revenue in places like professional services and uncollected use tax on out-of-state purchases.

NetChoice was invited to testify as to the dangers of hunting for the wrong game and to correct some bad hunting habits that have shown up in previous tax bills — especially the affilliate nexus, or “Amazon Tax.”

Steve DelBianco, executive director of NetChoice, explained how every state that enacted an affiliate nexus law saw Amazon and Overstock cancel their affiliate relationships (except NY, where Amazon collects so it could sue the state).  Steve explained how many elementary school PTAs in Maryland rely upon these affiliate commissions to buy playground and science equipment.

Steve challenged the Maryland committee to see the fallacy in a recent BaltimoreSun editorial calling for  “companies like to fork over the money”.  But Amazon doesn’t have any sales tax from Maryland customers, since it is not required to collect for states where it has no physical presence. And even if Amazon did collect, the money they’d be forking over” would come straight from the pockets of Maryland taxpayers.

Finally, Steve explained how the Streamlined Sales Tax plan is “not ready for prime time,” and would impose big collection burdens on small Maryland businesses who sell to customers around the country.

We left the Capitol knowing that this was only a preliminary hearing and that Maryland has no illusions of big game as it plans to hunt taxes among online retailers.

Kudos to Maryland on practicing proper hunting safety by educating itself before it drafts new tax legislation. It was a refreshing contrast to what’s happened in California and Illinois this year, where the lawmakers’ mantra was, “Ready … Fire! …  Aim.”