Outcry against online sales tax mounts as Senate votes to proceed

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Betsi Fores The Daily Caller News Foundation
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Critics of the online sales tax proposal ramped up their criticism Wednesday as the Senate prepares to consider the bill.

Much of the criticism centers on the bill’s requirements to subject online merchants to the nearly 9,600 separate tax jurisdictions across the country.

Americans for Tax Reform’s Grover Norquist sent an email Wednesday afternoon, urging supporters to sign a petition against the bill, pressing that “Your immediate action is critical!”

Jeff Jacoby of the Boston Globe opined that the bill in Congress should be renamed the “Marketplace Unfairness Act.”

“[I]f Enzi’s bill becomes law, fairness goes up in smoke,” he wrote. “Online merchants would become revenue collectors for every sales-tax jurisdiction in America — an estimated 9,600 of them, each with its quirks and quiddities. Brick and mortar retailers, alternatively, would still only be responsible for the tax jurisdictions where they operate.”

Jacoby cited the concerns expressed by Overstock.com’s chairman and CEO Patrick Byrne and president Jonathan Johnson.

“It took our team of 20-30 experienced IT professionals 9,412 hours over five months to install, test and integrate the software that let us properly calculate use tax in one additional state,” the executives wrote in an Wall Street Journal op-ed. “The annual software license fees for the first year, the internal and external development and installation costs, and the cost of collateral hardware and software came to $1.3 million. And that’s just for one state.”

Joining the ranks against the bill are the Financial Services Roundtable, SIFMA and the Home School Legal Defense Association. Notably groups that have already expressed their staunch opposition against the bill include the Heritage Foundation, Americans for Tax Reform, Americans for Prosperity and several other free-market think thanks, as well as Internet freedom groups such as NetChoice and TechAmerica.

“A change of this magnitude can’t be pushed through the deliberative body of Congress without careful consideration of the facts, including the open questions about various tax jurisdictions,” TechAmerica’s senior vice president for federal government affairs, Kevin Richards, said in a statement. “Without this examination, any legislation instating a new tax regime is unacceptable.”

Opponents argue that the bill will hurt small internet businesses.

“Companies with more than a few employees would be punished by the proposed tax scheme, which inadequately protects most small businesses from having to comply with costly and complicated requirements,” the We R Here coalition said in a statement. “A truly robust small business exemption is critical to the continued success of small businesses and entrepreneurs, will jumpstart our nation’s economy and create an environment for job growth and economic development.”

Earlier this week, eBay called upon its 40 million users to contact Congress over the current exemption level.

Still, many senators and supporters pitch the bill as a states’ rights issue.

“This legislation boils down to two words: states’ rights. We ought to support states’ rights by letting Tennessee and other states decide whether they want to collect taxes that are already owed, and how to treat businesses fairly in the marketplace,” Tennessee Republican Sen. Lamar Alexander, who has signed on as a co-sponsor, said.

Democratic Sen. Ron Wyden of Oregon, a state without a sales tax, stepped onto the Senate floor Wednesday afternoon to reject the notion that this proposal is one of states’ rights.

“Should states like Oregon be coerced, required to collect tax for states that are miles away?” Wyden asked. “States rights has to have an element of voluntary-ness.”

Under the bill as written, if a retailer is in a state without a sales tax, but sells to a consumer in a state with a sales tax, the retailer is still required to collect and remit that tax to the consumer’s state.

The nonpartisan Congressional Budget Office released its cost analysis for the bill Wednesday, and determined that it will have no federal cost impacts. Still, states are expected to provide software to the online retailers that will calculate the different tax collection requirements, free of charge.

Amendments are currently being offered for the bill, which is expected to be put to a vote in the Senate later this week.

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