President George H.W. Bush famously took a stand against broccoli, a brash move that won worldwide kudos from those who don’t like “eat your peas” politics. But sometimes — and I think moms can back me up on this — you need to eat your peas, political ones too. That’s why so many conservative groups, including the one I chair, are publicly backing the Marketplace Fairness Act.
The MFA is a bipartisan bill introduced this week in both chambers of Congress that aims to allow states more authority to collect the properly due sales taxes from out-of-state Internet transactions. The bill has overwhelming support from governors of both parties, because they consider it a necessary measure to protect retailers within their states’ borders.
Laws that enhance tax collection authority are not particularly popular with some, or considered especially “conservative” by others. But tax avoidance and the inequitable shifting of tax burdens is not fair, fiscally sound, or in line with the conservative principle of personal accountability. The MFA imposes no new taxes — I repeat, no new taxes. It only seeks to clarify the tax responsibility and burden of taxes properly owed.
Sales taxes remain a substantial source of state revenue, so when purchases are made on the Internet absent a sales tax, that cost is shifted to everyone, especially those paying income and property taxes to their state and locality. When the resident of a state purchases clothing, furniture, food, books, or any other number of items without paying a sales tax that would have been collected by a brick-and-mortar store within state borders, it puts an additional strain on all residents.
As a matter of fundamental fairness and personal responsibility, laws should not favor those who have the ability to avoid properly owed taxes by conducting business out of state or in the tax haven of Web commerce. Further, tax collection is a necessary and proper power of state government. Empowering states to redress unpaid taxes will strengthen our federal system.
Opponents of the MFA have two primary objections. First, they contend it is “harassment” to expand state taxing authority on purchasers. Second, they claim it will unduly burden Internet merchants and harm commerce. We believe that both of these claims are without merit.
Regarding the expansion of taxing authority, it should be repeated that states currently have the right to collect sales taxes based on the commercial activity of their residents. Whether a resident purchases an item on the Internet or at a store with a physical location, taxes are still owed to the state. It seems entirely improper that taxes can be avoided merely by a buyer’s preference of merchants.
As for the claim that the Marketplace Fairness Act would put an undue burden on Internet sellers, this is a wolf in sheep’s clothing. The notion that merchants have the technology and know-how to market, sell, ship, and track items to people thousands of miles away on credit, but not the ability to comply with tax laws, is absurd.
Millions of Internet merchants collect taxes every day with professional accounting tools that are as reliable and technologically sound as the shopping cart software they use to sell their wares. Taxes at the time of sale can be calculated and collected with the ease and reliability of all other steps in the transaction based on the state and locality of the buyer. Nearly all of the steps necessary to calculate and collect the tax can be made to be as automatic and seamless as every other part of the online transaction.
Internet commerce is not an infant industry that requires protection. To allow it to remain a haven for tax avoidance hurts everyone, and needlessly complicates tax policy by forcing states to attempt to predict consumer trends and behavior as they set their budgets and spending priorities. That’s a recipe that makes broccoli taste like a BLT by comparison.
Jim Martin is the chairman and founder of the 60 Plus Association.