Why Marketplace Fairness Is Not

I think I’ve written before about how we should all be leery of pre-laws (bills) with lovely sounding names. Mark Alexander gives us another reason to support that thinking:

Under cover of the Republican Presidential Primary debates about how to defeat Barack Hussein Obama’s socialist agenda and his plan to fund the final chapter of that agenda with enormous tax increases, Sen. Lamar Alexander (R-TN, no relation!) and Sen. Dick Durbin (D-IL) have teamed up to promote one of the largest tax increases in U.S. history — a heavy levy on all Internet sales.

The so-called “Marketplace Fairness Act” S. 1832 was first proposed in November 2011 by Sen. Michael Enzi (R-WY), and now awaits action in the Committee on Finance.

In brief, S. 1832 would seek to tax all internet-based purchases. Mr. Alexander goes on to provide a good explanation of why this tax increase is anything but fair, but the part that grabbed me the most is as follows:

[U]nder our present Constitution, if I purchase a product from another state, it is NOT subject to state taxes in my state of residence unless that vendor has a retail presence in my state. That has been the standard for interstate commerce for generations, whether placing orders by mail, by phone or by Internet (Quill v. North Dakota regarding the latter).

Thus, suggesting that I “owe the state” sales tax when I purchase a product from another state is patently false.

Ah, yes. But remember, the government allows us to keep part of what we work for. It is only because of this sufferance that we have anything at all to deposit in our bank accounts on payday.

We should be happy that state governments will finally be able to take back more of what is already theirs.

 

6 thoughts on “Why Marketplace Fairness Is Not

  1. Ah, instead of divulging the truth regarding legal tax due on out of state purchases you choose to mislead based on half truths. Your statement maintaing sales tax not being required on out of state purchases is correct, but the forty five states whom maintain consumption taxes maintain sales and USE taxes. Use taxes are legally required to be remitted by consumers on their out of state purchases. The distinction being when the tax is collected and remitted by the merchant the term sales tax applies. When the merchant fails to provide the service benefitting the consumer the use tax honorably becomes the obligation of the consumer. The passage of the Marketplace Fairness Act will eliminate society’s burden having to track and remit use taxes.

    It is important to remember consumption tax is most effective when applied equally. Lets do some basic math. Lets figure your city requires $10,000,000 to fund the schools, fire, police, medical and infrastructure the 100,000 residents vote for and demand. For this example we will agree that all 100,000 consume the same amount of goods dividing their sales tax burdens evenly. Therefor, each person will pay $100 each. Now lets add the Internet and tax evasion into the equation, and only half of your city has Internet access. Is it right for half the city to vote for and demand services while evading their legal sales tax obligation? Not half the city without Internet access is paying $200.

    Choosing to pay sales tax at the time of transaction when we have money to spend is preferable over more demanding mandatory property taxes. The facts are really simple A + B = C. A & B are tax schemes maintained to equal C representing the demands we place on society. It’s our Governments job to find ways to make sure A + B = C. If A should decline in value Government is therefor forced to increase B in an effort to maintain the value of C. If we choose to support less funding for education, police, fire, infrastructure and medical care then perhaps consideration can be given to lowering tax rates.

    The Marketplace Fairness Act simply enables states rights to collect existing taxes being knowingly evaded providing the means to undue harmful taxing methods providing CHOICE to it’s citizens once again. It’s time we all participate and support the laws of or nation and the states we reside. Progressive action eliminating bureaucracy making tax collection and remittance easier for both merchants and government is exactly what the Marketplace Fairness Act will accomplish. Utilizing the very technology that got us into this mess will automate and simplify tax procedures putting a larger percentage of every tax dollar collected back into the services we demand. Maintaining our current legacy tax procedures costs us all. It’s time for progressive change, I strongly urge Congress to pass the Marketplace Fairness Act.

    1. Thank you for your thoughts.

      If states require that use taxes be remitted by their citizens for out-of-state purchases, then it is up to the states to enforce existing laws. If they are unable to enforce such laws, then they may wish to consider why that is–and if the laws are in keeping with Constitutional authority. It should not be the responsibility of State A to ensure that Citizen 1 of State B is in compliance with the tax rules of State B.

      Unlike you, I am in favor of regressive change. If states are concerned with the taxes they are losing out on because of out-of-state purchases, then those states could figure out why people are going elsewhere and maximize the attractiveness of their laws and regulations to bring more commerce into the state.

      Further, it is not government’s job to tax us to pay for everything we wish to have. It is government’s job to provide us with the framework of the rule of law (and its enforcement) which is supported by the US Constitution. Within that context, government is only to take via taxation that which is essential to provide those duly defined duties of government.

  2. What would be “fair” would be to add a provision requiring all Brick and Mortar stores to check customer I.D.’s
    and then collect and remit the correct sales tax back to the home state of all of their customer’s visiting from out of state.

    1. No, sir/ma’am. That would be an unnecessary burden on the stores which are already dealing with their home state’s laws and regulations.

      Further, we are going to have stores checking IDs to determine residency when we cannot even get people to agree that showing IDs to prove residency when participating in public elections safeguards those same elections?

  3. To clear some things up…

    1) Under present circumstances, most states levy “use” taxes. The tax is owed by the person using the goods and/or services, NOT by the business. The business is merely required to collect that tax on behalf of the state. Whether a person buys an item over the internet or via phone or at a store with a physical presence in the state, the person still (in most instances) owes the tax. If the business is not located within the boundaries of the state in question, the state cannot require the business to collect that tax – they have no legal jurisdiction over the citizens of another state and regulation (which includes taxation) of interstate commerce is the sole prerogative of the national government.

    2) The bill in question will allow states to enter into an agreement to collect each others’ sales and use taxes provided they take some steps to conform their own tax laws to a national standard of assessment and collection, and provides an exception for businesses whose gross “remote” (i.e., internet, phone, etc.) sales total less than $500,000 annually.

    Thus in terms of protecting the small brick & mortar guy from the small internet guy it won’t do a thing. It will ease the ability of the large brick & mortar guy (like Barnes & Noble) to compete with the large internet guy (like Amazon). Depending on how the law is worded (I only read the summary) it could kill a business model like Amazon Marketplace or E-bay (is the gross remote sales total that of E-bay/Amazon, or that of the individual seller?).

    It will raise overall consumer prices.

    It will encourage at least a couple states to opt out of the agreement in order to draw business to the state – if Amazon is located here, and SD opts out of the national agreement, they wouldn’t have to collect the taxes. For now.

    And, most troubling, it is the foot-in-the-door for federal regulation of local taxes. Right now, it’s a matter of regulating how those taxes are levied and collected. It’s only a matter of time before it’s a matter of regulating rates (after all, it’s not fair if Chicago charges more in taxes than Sioux Falls, so Sioux Falls will have to raise its rates) and requiring states to participate. The feds will also decide they need a cut – ostensibly to “manage the program” but really a clandestine way to impose a national sales tax. It is a serious blow to local authority, freedom, and the very principles of federalism. States should have a care that they not let the prospect of a few dollars further erode their freedom of action.

    1. Well said.

      The negative consequences of further federal intrusion into state and local taxation far outweigh the perceived benefit of the bill in leveling the playing field.

      As you have described it, the playing field would not so much be leveled as terraced–with larger commercial entities benefiting at the cost of smaller ones.

      Not only is this law a poor idea, but it takes us further in precisely the direction we have been going (and which has helped to put us into our current financial pickle).

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