As Congress ponders Internet tax legislation, the chairman of the House committee with jurisdiction over the issue has laid out basic principles to guide the discussion. They include a level playing field for brick and mortar, "brick and click" and exclusively online sales and a Web take on the Boston Tea Party: "No regulation without representation."
"The aim of the principles is to provide a starting point for discussion in the House of Representatives," said House Judiciary Committee Chairman Bob Goodlatte (R-Va.). Goodlatte said the principles are the product of input from taxpayers, business, trade groups and government entities.
The principles are:
1. "Tax Relief – Using the Internet should not create new or discriminatory taxes not faced in the offline world. Nor should any fresh precedent be created for other areas of interstate taxation by States."
2. "Tech Neutrality – Brick & Mortar, Exclusively Online, and Brick & Click businesses should all be on equal footing. The sales tax compliance burden on online Internet sellers should not be less, but neither should it be greater than that on similarly situated offline businesses."
3. "No Regulation Without Representation – Those who would bear state taxation, regulation and compliance burdens should have direct recourse to protest unfair, unwise or discriminatory rates and enforcement."
4. "Simplicity – Governments should not stifle businesses by shifting onerous compliance requirements onto them; laws should be so simple and compliance so inexpensive and reliable as to render a small business exemption unnecessary."
5. "Tax Competition – Governments should be encouraged to compete with one another to keep tax rates low and American businesses should not be disadvantaged vis-a-vis their foreign competitors."
The Computer & Communications Industry Association (CCIA), whose members include eBay, Google and Yahoo, welcomed the principles, particularly if it means a different outcome than the Senate-passed, CCIA says "rushed," Marketplace Fairness Act (MFA).
"Proponents of MFA have repeatedly portrayed their argument as a matter of 'fairness' and 'leveling the playing field,'" said CCIA President Ed Black. "This simplistic view is based on the premise that having online retailers collect sales taxes would result in a fair balance, yet the collection burden for online retailers covering thousands of jurisdictions is far heavier than that of a physical store."
He cited Goodlatte's statement that "the sales tax compliance burden on online Internet sellers should not be less, but neither should it be greater than that on similarly situated offline businesses."
"We have also criticized the notion of state and local tax authorities dumping the burden of collection on online retailers without doing the hard work of tax simplification," said Black. "Chairman Goodlatte's 'Simplicity' principle addresses this point: 'Governments should not stifle businesses by shifting onerous compliance requirements onto them; laws should be so simple and compliance so inexpensive and reliable as to render a small business exemption unnecessary.'"
The Digital Marketing Association registered the same concerns about the Senate bill earlier this year, saying it would "conscript American businesses with no presence in a state and force them to become the unpaid tax collectors for that state."