PublishedAugust 1, 2012

Senate Commerce Committee Holds Hearing on Online Tax Collection

Despite current economic conditions, Congress seems to be proceeding with a new tax collection mandate. On Aug. 1, the Senate Committee on Commerce, Science and Transportation will hold a hearing on Internet sales taxes.  The Computer & Communications Industry Association continues to oppose legislative efforts to shift the burden of tax collecting requirements to online retailers regardless of physical presence.  CCIA believes that drafting online vendors into service as remote sales tax collectors in a ham-handed attempt to impose a one-sided version of “fairness” is unjustified and unwise.

The following can be attributed to CCIA President & CEO Ed Black:

“The title of this hearing characterizes imposing a tax collection mandate on online retailers as Marketplace Fairness.   Yet online retailers and brick & mortar stores have distinct business models whose differences go beyond tax collection.  It is hardly fair to not only to compare apples and oranges but also to force the oranges to become apples.”

“The assumption that having online retailers collect sales taxes would result in a fair balance is overly simple.  While the physical store only needs to collect sales tax for its own tax jurisdiction, an online retailer is being asked to administer a tax collection regime for thousands of state and local jurisdictions, as an online purchaser could potentially be in any one of them.  The compliance burden of managing a complex system of multiple tax jurisdictions is not at all comparable to collecting at a physical store for just that one jurisdiction.  If the burdens are different, the result would be a new tax imbalance.”

“The hearing title also mentions leveling the playing field for small businesses.  Yet a tax collection mandate would undermine the e-commerce model and disadvantage online small businesses.  E-commerce has enabled small businesses to grow by broadening the scope of their activities beyond traditional geographic limitations.  How is it fair for government to unilaterally decide to protect existing business models by penalizing those that utilize technology and innovation?’

“Innovation and entrepreneurship have always been the engines of our economic growth.  We need policies that recognize their value — not counterproductive regulations and mandates that penalize them.”

“A tax collection mandate that severs the link between taxes and physical presence could have wider implications.  Such a precedent could potentially lead to governments in other countries impressing U.S. online retailers into service as their tax collectors.”

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