The House Should Oppose the Harmful Internet Tax

The Internet sales tax bill passed in the Senate on May 6 by a vote of 69 to 27.  The bill’s fate is now in the hands of the House.  This tax would not promote “fairness” as its official name – the Marketplace Fairness Act – suggests.  There is bipartisan opposition to the bill, but unfortunately, there is also bipartisan support for it.  Ever in favor of more money coming into government coffers, President Obama has promised to sign the bill into law if it makes it to his desk.

EBay and – both internet giants – are split on the issue, with the former in opposition and the latter in support of the tax.  They have been weighing in on the debate since before the Senate passed the bill, and continued to make remarks over Memorial Day weekend:

“This legislation … is being called the Marketplace Fairness Act, but I strongly believe it creates an unfair tax burden for small online businesses,” eBay CEO John Donahoe wrote in an email to eBay account holders on Sunday.

So why is this so contentious an issue?

The truth is, it’s really not all that confusing, and if so many people weren’t interested in more taxes and less competition, it wouldn’t be so contentious.

Heritage explains in very clear terms that the Internet tax bill would harm online businesses and consumers.  Right off the bat, what must be understood is that brick-and-mortar stores are not at an “unfair” disadvantage.  Comparing them to online businesses is like comparing apples and oranges. 

Brick-and-mortar stores have physical presence in the states in which they are located.  The owners of those stores get to vote for their state and local level politicians.  Online business owners do not have representation in all the states in which this bill would require them to collect and remit taxes.

The real motivation behind this bill is not “fairness” as proponents allege, but the desire of states for more power and money.  This is totally improper and breaks down the protections of federalism.  This Internet tax is taxation and regulation without representation:

The proposed law would allow states to impose massive regulation and taxation requirements on online businesses outside their jurisdictions. This overreach would break down the federalism protections our Founding Fathers set up in the Constitution. 

Not only is this, but this tax would result in a costly compliance mess for online retailers by forcing them to collect a tax for nearly 10,000 tax jurisdictions and to face up to 46 out-of-state audits.  Why would our politicians want to smother small online businesses with this burdensome responsibility?

Finally, consumers could face higher costs for online shopping if Congress approves the sales tax bill.

Heritage recommends:

Washington should remove any threat of an Internet sales tax. Businesses and shoppers need to know now they will not be hit with a tax increase that could hamper e-commerce, kill jobs, and raise costs for everyone.

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