Internet Tax Bill Should Die in the 112th Congress

Online tax proposal too big and too broken to escape serious debate

Washington, D.C. – NetChoice today called on Congress to continue withholding support for the Marketplace Fairness Act (S. 1832).


The proposed legislation is missing essential simplifications and safeguards and would impose expensive new collection burdens on small businesses. Against those costs, the bill would bring in less than one-half of one percent of total state and local tax revenues.


“State legislators are conducting a last minute drive to pressure Congress on a half-baked internet tax proposal,” said Steve DelBianco, executive director of NetChoice. “The Marketplace Fairness Act does not deliver essential simplifications or adequate protection for small businesses, but it does guarantee headaches for years to come and damage to the economy.”


In the fall of 1999, the National Conference of State Legislators (NCSL) convened the Streamlined Sales Tax Project (SSTP). Its goal was to simplify and unify over 9,600 state and municipal tax jurisdictions, a patchwork that the Supreme Court ruled could not be imposed on out-of-state retailers.. Over a decade later that project has failed to produce meaningful simplifications or a unified and easy to implement tax system. NCSL seems to no longer believe its original vision is an achievable goal, but they want the new tax revenue nonetheless.


Today, dozens of state legislators from NCSL are visiting with Congressional offices to lobby for lame-duck passage of the Marketplace Fairness Act. Past versions of similar legislation required a simple, unified state tax structure to be in place before authorizing a new Internet sales tax. Alternate proposals also included specific safe harbors that protected small business owners from the cost and complexity of a new Internet tax.


Senator Durbin’s proposal puts the cart before the horse by overturning the Supreme Court by giving states the authority to tax out-of-state internet sales. They want these new tax powers without addressing the complexities and costs found by the Supreme Court.


“The creators of the original Streamlined Sales Tax Project tried to build a workable multi-state tax system,” continued DelBianco. “But the Marketplace Fairness Act discards their decade of effort and irresponsibly asks Americans to trust that state tax collectors have their best interests in mind.”