New York, NY, March 19, 2013—The Direct Marketing Association (DMA) opposes a proposed amendment to the FY 2014 Federal Budget that would endorse the Marketplace Fairness Act, a new Internet sales tax. DMA asserts that the Act, including the section codifying the Streamlined Sales and Use Tax Agreement, does not provide the needed harmonization across state taxing structures. Neither does it sufficiently reduce the deficiencies that led the Supreme Court in its 1992 Quill v. North Dakota decision to restrict states from requiring remote sellers to collect sales tax in the first place. Endorsement of the Act should not be considered in discussions on the Federal Budget.
This Act would grant states the authority to reach beyond their borders to conscript American businesses with no presence in the state and force them to become the unpaid tax collectors for the state. This is bad policy, as it interferes with the free-flow of commerce among the states, a principle upon which the United States was founded. In these difficult economic circumstances, placing new, unfunded mandates on out-of-state companies to comply with complex and changing tax structures, tax holidays, and tax thresholds in many states around the country will hamper e-commerce, a fast growing segment in our economy.
The Act, which purports to simplify the American sales tax system, actually expands it. The Act allows:
- States to maintain nearly 10,000 local sales tax jurisdictions with their own tax rates, tax holidays and thresholds;
- 46 states to conduct their own audits of conscripted American businesses across the country (requiring those businesses to hire tax attorneys, etc.);
- 46 states to create their own definitions of what each taxable good is (how much juice in a drink is needed to not be classified as a soft drink, for example);
- 46 states to interpret key terms for collection of sales tax, such as defining a "sales price"; and
- 46 states to create their own tax returns, filing schedules and deadlines.
This Act also enters a troubling area by allowing the long-arm of state taxing authority to grab non-citizen businesses. There is no preemption of state attempts to stretch sales and use tax laws beyond their borders to hook out of state businesses. The Marketplace Fairness Act allows such action. This is a dangerous road—one which should not be taken.