Skip to comments.Internet Taxes Move to the Forefront in a Number of States
Posted on 02/27/2012 8:37:40 AM PST by 92nina
As many states move forward with pro-growth spending and tax reforms, a couple of state legislatures are taking steps in the opposite direction. Legislators in Virginia and Kansas are advancing bills that seek to dissolve the physical nexus standard in their respective states and implement an Internet sales tax on out-of-state companies. This type of tax will not only kill jobs and close down businesses, as it has done in other states, but it is also entirely unconstitutional.
In Kansas, SB 371 moves to push the long arm of the tax collector past its appropriate state boundary and count third-party online advertisers as a physical nexus of the larger companies for which these entities advertise. So, for example, an ad on the Kansas City Stars website for an online retailer based in California would now mean that retailer has to collect tax in Kansas. Not only does this fly in the face of the U.S. Supreme Courts Quill v. North Dakota decision, which holds that an out-of-state retailer cannot be forced to collect taxes for the state, but a similar measure is already undergoing a legal challenge in New York. As the history of Internet taxation has shown, these new taxes do nothing to level the playing field with brick-and-mortar businesses, but will put Kansan advertisers out of work and fail to raise revenue for the state. In the states in which an affiliate nexus tax has already been passed, online retailers have terminated contracts with in-state advertisers to avoid this unconstitutional tax, causing tens of thousands of residents to go out-of-business. ATR sent a letter to the Kansas legislature urging them to vote against SB 371. The letter can be found here.
The legislation in Virginia (SB 597) would force out-of-state businesses to notify Virginia residents of their use tax obligations, a measure which could also face a legal challenge. A similar reporting requirement law in Colorado recently received a preliminary injunction as it also goes against the precedent set forth in Quill by violating the Commerce Clause. The courts ruling in Colorado was that the state could not impose any notice and reporting obligations on out-of-state companies, particularly when in-state companies do not have these same requirements. Along with the constitutional concerns, the new tax would also deter in-state investment by forcing collection obligations on companies that take even a very small ownership stake of a company in the state. It will encourage remote sellers to expand their operations to other states that do not have similar requirements. Hardly the type of legislation Virginia needs to move forward its economic growth. ATR recently sent a letter to the Virginia legislature urging them to vote against this measure. Click here to read the full text.
A number of other states also have similar legislation moving forward: Minnesota (HF 1849), Maryland (SB 152), Arizona (HB 2804), Mississippi (HB 135), Missouri (HB 1569), and New Jersey (SB 1305). Iowa has a comparable initiative moving forward, and Maryland will be holding a hearing on Internet taxation in the near future. It is important that these state legislatures keep in mind the dubious constitutionality of Internet taxation, as well as the effect that it would have on in-state business.
For an in depth look at the issue, check out a video[link] (below) of ATRs Kelly William Cobb on an Internet tax panel at the International Students for Liberty Conference held in Washington, D.C. Andrew Moylan of the National Taxpayers Union and Joe Henchman of the Tax Foundation were also featured on this panel.
these people should just go away
Meanwhile, Kentucky is considering abolishing their state income tax...
The money quote. States know that Internet retailers can legally ignore these laws with impunity. This is nothing more than a scare tactic to try and force Internet retailers into doing something they don't have the legal authority to force them to do. I'm guessing what will happen will be the small to medium size retailers will do it for fear of an expensive legal battle, while the large ones that can afford hordes of lawyers will rightly tell the states to go to hell...
I wish Utah would. All state income taxes here go to pay for “education.” So essentially, there’s an institutionalized shakedown of all people without kids by people with kids. The people with kids, pay little to no taxes for thie children because of all of the deductions and demand the most from the system. The folks without kids have the least drain on the system and are footing the bill. Like virtually all other government (military being the possible exception, but not explaining it on this thread), Government should be funded by user fees, and limited to the Constitution. All schools should be private, and not one red cent should be taken from one person to pay for another person’s lifestyle. For education or otherwise.
“small to medium size [taxpayers] will do it for fear of an expensive legal battle, while the large ones that can afford hordes of lawyers will rightly tell the states to go to hell... “
You’ve just inadvertantly described the problem with an income tax at the same time, lol.
“I’m guessing what will happen will be the small to medium size retailers will do it for fear of an expensive legal battle, while the large ones that can afford hordes of lawyers will rightly tell the states to go to hell...”
Actually, it’s the large retailers that are in favor of internet taxes because they have the resources to deal with the red tape. You won’t recognize the internet in 10 years. Big money is buying off the politicians who are only to happy to take the payola and regulate. The internet will be like just another cable TV channel in 10 years.
Virginia and Kansas should pay more attention to things like this:
If those states send their agents to another state to enforce these laws those agents and their home state will be on the hook for some serious damages.
Also, we moved to Wyoming from California in 2009 and we had two CA FTB agents show up at the house last September demanding that we pay taxes to California for 2010. We called the Sheriff and he told the FTB agentsa that they had no authority in Wyoming and that if they ever come back and if we shoot them he’d be okay with it. Haven’t heard a thing from them since. I imagine that’s how it will roll when Kansas and Virginia send tax collectors to Castle Doctrine states.
I'm curious about something.
Would that decision still allow the states to force Internet retailers to report their sales? If so, the states would have enough info to collect the taxes themselves.
The article is based on a faulty premise — that there is some new “internet tax” being imposed.
In fact, the sales tax already applies, in every state that has the sales tax, to all purchases, regardless of where they are purchased.
All that is changing is HOW the sales tax is collected. Previously, if a company didn’t collect the sales tax, the individuals had to file and pay; and a lot of individuals didn’t know, or knew but cheated on their taxes.
Now, states are making agreements with Amazon to collect the tax, and this will make taxation more fair, and is a good conservative outcome — taxes should be spread out broadly over similar activity, and not pick “winners and losers”. Allowing some retailers to have a tax advantage over others selling the same items was skewing the market, and causing people who shopped locally to pay a higher tax burden subsidizing the cheaters.
Now they won’t.
I say fine, great, go for it. Make sure you give the vendor appropriate payment for services rendered, however. Because saddling an in state company with paperwork for sales taxes is one thing - as they benefit from the services paid for through sales taxes.
But forcing an out of state company to eat up to 9% of the taxes collected in processing fees, plus the time to file those forms, plus filling out the applications etc, where they get no direct benefit nor payment is completely and utterly wrong.
It amounts to an import duty that just HAPPENS to be the same amount as sales taxes in a state, and that is unconstitutional. Not that this stopped a liberal before.
I wonder if the California government paid for those agents’ trip back and forth. No wonder California is going downhill.
And way to tell those agents to get.
I believe the Virginia matter pertains to Amazon`s move into the state.
The FTB people showed up demanding that we give them what they said we owed for 2010 or that we could be arrested. While they were giving my husband hell I called the Sheriff’s dept. and they came out pretty fast and the Sheriff himself came out, too. He told them he knew us personally and that he came to the house when we moved here in 2009 to welcome us. With that he told the FTB people that they had no authority in Wyoming and that he was “okay with it” if we shot them as trespassers if they ever came back. They haven’t. As far as we can tell they dropped the whole thing because we don’t even get mail from them anymore.
You are exactly correct.
How and who.
Bravo for fighting against the evil government parasites. Government at all levels is mostly a criminal enterprise.
The parasites called themselves public servants -- ha. They are more evil than common thieves because they intimidate citizens through the power of the State.
BTW, what does FTB stand for?
I used to live in California, so I know the answer to your question.....
FTB = Franchise Tax Board.
To add to my previous post....
The FTB....The Franchise Tax Board....their supposed purpose is to collect state personal income taxes and bank and corporation taxes for the State of California.
On a yearly basis, I would like to see the total dollars expended by FTB parasites traveling/lodging around the country VS the dollars collected.
I am certain these FTB parasites feel happy about getting "free" trips all over.
Government spending at all levels is obscene and destructive to our Liberties.
As time passes, it seems the most desirous path for our Republic is to have a total economic collapse and the ridding of our Republic of these parasites.