As the debate over the merits of an online sales tax policy that would allow states to collect tax from vendors outside their state boundaries brews, a lobbyist for the National Retail Federation, a group supporting the proposed legislation, dismissed the United States Constitution as an “18th-century document.”
“The industry is evolving very rapidly, and the law today is a 20th-century interpretation of an 18th-century document that is holding back the entire retail industry as it adapts to 21st-century consumer preferences and demand,” David French, senior vice president for government affairs at the NRF, said in a statement provided to the Wall Street Journal.
The constitutional context of the online sales tax surrounds the “commerce clause” in Section 8 of Article I, which gives Congress the authority “to regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes.” This power has traditionally been interpreted to mean that states cannot tax outside their borders. The Quill v. North Dakota Supreme Court ruling determined that a business was required to have a physical presence in a state in order for the state to collect sales tax.
The pending legislation would undo this and allow states the authority to require businesses to collect and remit sales tax at the time of purchase if the buyer is in the state.
Opponents of the bill, titled the Marketplace Fairness Act, call the move a tax grab by states and argue it would vastly expand states’ taxing authority. They site the nearly 9,600 tax jurisdictions retailers would have to comply with under the new law.
RedState’s Erick Ericson says the bill is designed to favor “massive corporations like Wal-Mart who want to hurt small businesses that have become successfully competitive against big retailers.” Americans for Tax Reform founder Grover Norquist told The Daily Caller recently that the bill’s real purpose is to allow “loser states…to extend their tax rates into other states that have done a better job on taxation.”
Proponents meanwhile, contend the bill is about states’ rights.
“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 on the Senate floor Wednesday.
The corporate giants in support of the bill include big-box chains like Best Buy and Wal-Mart, which currently exist in every state and thus already collect sales tax for online purchases, as well as Amazon, which recently has expanded its locations into new states to provide faster delivery for customers. Amazon previously opposed any kind of internet sales tax legislation.
Online marketplaces like eBay and Etsy, meanwhile, oppose the legislation because retailers who use their sites and services would be directly affected.
There is an exemption for small online retailers making less than $1 million a year.
However, opponents point out that this is hardly an exemption. Small businesses defined by the Internal Revenue Service is a business that makes $30 million in revenue or less and the Small Business Administration classifies small businesses as earning less than $20 million.
The Senate is scheduled to vote for the bill on May 6.
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