WASHINGTON (March 11, 2015) – The R Street Institute expressed disappointment at yesterday’s reintroduction of the so-called “Marketplace Fairness Act” in the U.S. Senate. This poorly designed bill would allow states to impose complicated and burdensome tax collection requirements on out-of-state businesses.
“This was a bad bill in the last Congress and it’s still a bad bill now,” said Andrew Moylan, R Street executive director. “By wiping away geographic limits to state tax authority, the legislation would impose serious burdens on Internet retail and undermine basic tax policy principles.”
R Street has advocated for an innovative approach to the online sales tax issue, origin sourcing, where remote retail sales would be governed by the same collection standards that exists for brick-and-mortar sales today. Essentially, businesses would collect taxes based on their physical location, not the residence of their customers. Some members of the House of Representatives already are exploring such legislation.
“An origin-sourcing approach could address the concerns the Marketplace Fairness Act’s proponents raise, while preserving proper limits on taxation, due process and privacy protections for consumers,” said Moylan. “The MFA suffers from a fatal flaw: empowering states to tax entities outside their borders, forcing online retailers to collect under the rules of as many as 9,998 taxing jurisdictions and exposing them to audits in 46 states with sales taxes.”
National and state-level polling done jointly by R Street and the National Taxpayers Union shows overwhelming disagreement with the MFA across the country, with a nearly 40 point margin of opposition among Republicans, 20 points among independents and even five points among Democrats.
“Our polling shows that the universal response of Americans to this issue is that the Internet should exist to enrich their lives, not the treasuries of other states,” said Moylan.