Campaign for Liberty to Congress: Read our lips No New Internet Sales Taxes

An Open Letter to the House of Representatives:

Oppose the Remote Transactions Parity Act!

Dear Representative,

On behalf of the millions of citizens represented bythe undersigned organizations, we write in strong opposition to the so-called “RemoteTransactions Parity Act” (RTPA). Despite what some supporters claim, this legislation does not appropriately address the fatal flaws of its predecessor, the “Marketplace Fairness Act” (MFA). Like the failed MFA, the new RTPAwould dismantle proper limits on state tax-collection authority while potentially causing serious damage to electronic and interstate commerce.

The “Remote Transactions Parity Act” would countenance an enormous expansion in state tax-collection authority by wiping away the “physical presence standard,” a baseline protection that shields taxpayers from harassment by out-of-state collectors. Current law dictates that a state can only require a business to collect its sales tax if it is physically present within its boundaries. Far from a “loophole” intended to advantage the Internet, it is the result of the 1992 Supreme Court decision in Quill v. North Dakota, which was grounded in a bedrock foundational principle of federalism: states must not be allowed to extend their taxation and regulatory authorities beyond their borders. Dismantling this protection for remote retail sales would create a very slippery slope for states to attempt collection of business or even income taxes from out-of-state entities.

Furthermore, the bill would create a decidedly “unlevel” playing field between brick-and-mortar and online sales. Brick-and-mortar sales across the country are governed by a simple rule that allows the business to collect sales tax based on its physical location, not that of the item’s buyer. Under the RTPA, that convenient collection system would be denied for online sales, forcing remote retailers to ascertain their customers’ place of residence, look up the appropriate rules and regulations in nearly 10,000 taxing jurisdictions across the country and then collect and remit sales tax for a distant authority with which they may have no tangible connection, subjecting themselves to as many as 46 state tax  audits in the process. Imposing this unworkable collection standard on remote retail sales but not on brick-and- mortar retail sales would be unfair and result in enormous complexity and damage to interstate commerce.

While RTPA sponsors claim that it “fixes” auditing and compliance concerns raised by the previous Marketplace Fairness Act, the reality is that it does nothing of the sort. The bill’s paltry “small-seller exception” eventually settles at just $1 million and, unlike previous bills, applies to all annual receipts instead of just the portion associated with remote sales.