Every time Congress has taken a serious look at proposals to boost Internet sales taxes, it has rejected them. That’s probably why pro-tax Senators are trying to rush through an online tax hike with as little consideration as possible.
As early as Monday, the Senate will vote on a bill that was introduced only last Tuesday. The text of this legislation, which would fundamentally change interstate commerce, only became available on the Library of Congress website over the weekend. And you thought ObamaCare was jammed through Nancy Pelosi‘s Democratic House in a hurry.
For Senators curious about what they’re voting on, it is the same flawed proposal that Mike Enzi (R., Wyo.) introduced in February. It has been repackaged to qualify for a Senate rule that allows Majority Leader Harry Reid to bypass committee debate and bring it straight to the floor.
Mr. Enzi’s Marketplace Fairness Act discriminates against Internet-based businesses by imposing burdens that it does not apply to brick-and-mortar companies. For the first time, online merchants would be forced to collect sales taxes for all of America’s estimated 9,600 state and local taxing authorities.
New Hampshire, for example, has no sales tax, but a Granite State Web merchant would be forced to collect and remit sales taxes to all the governments that do. Small online sellers will therefore have to comply with tax laws created by distant governments in which they have no representation, and in places where they consume no local services.
Meanwhile, New Hampshire’s brick-and-mortar retailers will bear no such burden. They will not be required to collect taxes on the many customers who drive across the Maine and Massachusetts borders to shop in New Hampshire. Bill sponsors say it would be too big a hassle to force traditional retailers to ask every walk-in customer where they live, but these Senators are happy to impose new obligations online.
This rush to tax is an attempt to overturn the Supreme Court’s 1992 decision in Quill v. North Dakota that forcing businesses to collect and remit taxes to jurisdictions where they have no physical presence was too big a burden. Though that ruling applied to catalogs in the pre-Internet age, it established an important principle of cross-state tax accountability.