Online Sales Tax Legislation Still Not Ready For Prime Time

NetChoice Executive Director Steve DelBianco testifies that proposed legislation will harm online businesses, e-commerce.


WASHINGTON – “Legislation forcing online sellers to collect sales tax for nearly 10,000 tax jurisdictions places unique, unfair burdens on Internet-based companies and should be repaired rather than rushed through Congress,” NetChoice Executive Director Steve DelBianco said today in testimony before the Senate Energy, Commerce, and Transportation Committee.


S. 1832 is based on a flawed premise that states have “streamlined” the collection of sales tax for multiple jurisdictions. In his testimony, DelBianco takes on the argument for “streamlined” collection and identifies concrete ways that small businesses would be harmed if the bill passes.


“This online tax bill would accomplish the exact opposite of creating ‘marketplace fairness’ by further tipping the competitive advantage in favor of big box retailers and the very largest of online sellers,” DelBianco said. “If Congress’s real goal is to achieve fairness, we need to work together to develop real protections for the small and mid-sized businesses that stand to be harmed by this measure.”


DelBianco cited the example of the Waynesboro, VA-based Silver Gallery, which sells to a national customer base through its website. The retailer estimates that it will cost more than $20,000 just to implement the ostensibly free software developed as part of the Streamlined Sales Tax Project (SSTP).


The Silver Gallery is just one of thousands of businesses nationwide that would bear the substantial new burdens imposed by the Marketplace Fairness Act.  The SSTP’s own study found that small online businesses spend 17 cents for every dollar they collect for states and, even under the most optimistic prognostications, “free” tax-collection software only reduces that burden by 2 cents.


“While it’s true that a lot of time has passed since states first began to address this complicated issue, sales tax regimes are more complex today than ever,” DelBianco said. “Small retailers shouldn’t be held responsible for the failure of the streamlined process.”