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E-Commerce Bill Should Be Defeated


If Tax Day ruined last week, this one won't start any better. With the Easter recess behind, Sen. Dick Durbin, an Illinois Democrat, plans to introduce legislation that would allow states to force out-of-state retailers to collect local sales taxes.

Dubbed the Main Street Fairness Act, this $23 billion tax increase is a direct attack on e-commerce. We strongly oppose Sen. Durbin's measure because it raises taxes and outsources tax administration to an unelected corporation of tax bureaucrats.

Thanks to websites like Amazon, anyone can turn his or her favorite hobby into a side business. But state governments ignore these economic benefits and cry about lost sales tax revenue from online transactions. That's because businesses are only required to collect sales taxes when they have a nexus with a state. Consequently, an online bookstore based in Texas is not required to charge sales taxes on books shipped to Craven County.

"Why should out-of-state companies that sell their products online have an unfair advantage over Main Street brick-and-mortar businesses?" Sen. Durbin rhetorically asks to justify his bill.

Our answer: it's philosophically wrong and practically impossible to apply local sales tax laws to out-of-state retailers. Unlike Sen. Durbin, we believe that taxes should have a reasonable connection to the government benefits they support. While out-of-state retailers don't charge sales taxes, they also don't reap any of the benefits from another state's government.

Out-of-state businesses never contribute to the wear-and-tear on state highways, public safety needs, or other basic infrastructure costs.

On a practical level, it would be nearly impossible for online businesses to comply with the nation's patchwork of sales tax laws. Most consumers see sales tax as a simple but painful charge. However, for retailers, sales tax laws are a costly administrative headache. The ingredients, location and even temperature of an item all affect whether it is subject to sales tax. Now, multiply these regulations by 8,500. That's the number of local jurisdictions throughout the country with the power to determine their unique tax rate with additional local taxes. No business could keep track of every jurisdiction's fluctuating rates and regulations.

Not to worry, Sen. Durbin has a solution to this administrative nightmare.

His proposal would outsource tax regulations to a private corporation: the Streamlined Sales Tax Governing Board, Inc., based in Indiana.

This unelected corporation of tax administrators would have the power to redefine state sales tax regulations for the entire country. We believe that outsourcing tax decisions to an obscure entity would make it easier for stealth tax increases. Americans for Tax Reform agrees. They point to more than $350 million in higher taxes paid in states that have joined this streamlined sales tax agreement. Moreover, we think that even supporters of higher taxes understand the problem of outsourcing tax decisions to an unelected, private corporation with minimal oversight or public accountability.

It's true that online businesses reduce consumers' sales tax burdens. We believe that is a reason to embrace, not indict, e-commerce.




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