Retailers claim nationally that states could raise $23 billion in revenue if they collected Internet sales tax, and then they whine when taxpayers point out that it is a tax increase. In fact, this $23 billion collection number that they cite comes from .... wait for it .... the National Council of State Legislators.
Yes, some state legislators and governors want to reach across their state borders to your pockets, where you can't vote against them and take your money. Yes, you get hit when you travel to another state and pay their taxes, but with this new tax you aren't even in their state.
An amendment to the Senate budget, which was described as an amendment to "establish a deficit-neutral reserve fund to allow states to collect sales and use taxes already owed under state law," passed the Senate.
It is intended to be proxy-vote for a bill called the Marketplace Fairness Act.
Here are the top five reasons conservatives are against this bill, beside it being a tax increase:
1. The bill expands state tax authority - State governments will be able to tax across their borders despite clear legal and judicial precedent arguing otherwise. Plus, in the case of an audit, businesses would be required to settle disputes with out of state revenue boards in out of state courts.
2. The bill saddles small business with bureaucratic red tape - Small businesses would be forced to accommodate over 9,000 highly variable state and local tax codes, collection standards, and remittance schedules.
3. The bill threatens privacy - Business and state revenue boards with a track record of losing private information will have more chances to do so.
4. The bill discourages tax competition -- Rather than competing to lower taxes and attract businesses, states will compete to raise taxes on residents of other states.
5. The bill imposes bigger and bigger government - The bill will open the door for further government intrusion into the Internet and for states to reach across their borders for other taxes.
At the end of each year, businesses are responsible for sales tax.
Businesses can choose to tax their customers at the point of sale or pay what they owe in sales tax at the end of the year. Businesses, therefore, act as a tax collection arm for the state in which they are located and are the immediate taxpayer, not the consumer. During an audit, it is the business that is responsible for settling any outstanding balances. The state revenue departments do not pursue consumers over individual purchases; the state revenue departments pursue the business.
Use Tax is owed by consumers to the states where they reside, not to the states where they make purchases. The Marketplace Fairness Act would make businesses responsible for collection and remittance of out-of-state consumer purchases. Remote sales tax would force businesses to become sales tax collectors for all states. For example, if a customer in New York state made a purchase from a company based in Virginia, the Virginia business would have to collect New York sales tax from the customer and then send the collected tax back to New York. At the end of the year, if there are disputes over sales tax collection, the Virginia business would be subject to the New York State Department of Taxation and Finance and New York courts.
In order to collect the proposed remote sales tax, businesses would be forced to send personal information about their businesses to a host of state revenue departments, instead of just the one in their home state.
In the case of an audit, businesses would have to demonstrate where purchases came from, which affects customers' privacy. This opens businesses and consumers up to the very real potential of losing personal information. In South Carolina, for example, hackers gained access to tax return data, including Social Security numbers, of 5.7 million people and
700,000 businesses. Hackers have consistently proven they possess the capabilities to overcome many security measures. Government agencies lack the expertise and resources to properly protect the personal information they already gather. A law that mandates they collect more information only makes more individuals and businesses vulnerable to the dangers associated with the loss of personal data.
Of even greater concern is that a remote sales tax will create competition among states for higher taxes, rather than lower taxes. Currently, states can only tax those consumers who reside within their borders. This "physical presence standard" ensures that the businesses taxed by states have the ability to express their approval or displeasure with state tax code through elections, referendums, etc. This legislation encourages states to collect taxes across their borders from businesses with no recourse. Thus states will compete for revenue by increasing cross-border taxes, rather than lowering taxes. An incentive to raise taxes can never prove beneficial.
For the reasons outlined above, it is no surprise that Americans for Tax Reform, the Heritage Foundation, Heritage Action, National Taxpayers Union, the Competitive Enterprise Institute, FreedomWorks, Americans for Prosperity, the Cato Institute, the R Street Institute, and the Campaign for Liberty all oppose the Marketplace Fairness Act.