On Monday, the United States Supreme Court rejected without comment an appeal by Amazon and Overstock – two of the world’s largest online retailers – of a New York court decision that upheld the state’s 2008 law requiring the collection of taxes for online purchases. The Supreme Court in the 1992 decision, Quill v. North Dakota, left it to Congress to compel the collection of sales taxes over state lines.
Amazon collects taxes in 16 states in which it has established “nexus,” or a physical presence in the state, the principle upheld in Quill.
The following statements from tax and technology policy experts at The Heartland Institute – a free-market think tank – may be used for attribution. For more comments, refer to the contact information below. To book a Heartland guest on your program, please contact Director of Communications Jim Lakely at [email protected] and 312/377-4000 or (cell) 312/731-9364.
“How fitting that on ‘Cyber Monday’ the Supreme Court denied taking up a New York court case regarding the implementation of the state’s Internet tax. Calls by brick-and-mortar retailers for Congress to take up the Marketplace Fairness Act, which would eliminate the physical presence standard and allow states to collect Internet sales taxes, continue to increase. Unfortunately for these vested interests, the public disagrees with placing a new tax on Internet sales. Earlier this year a Gallup poll found that 57 percent of respondents opposed such action.
“Allowing states to place a destination-based tax on Internet purchases like the Marketplace Fairness Act does would undercut competition among the states and drive up taxes on consumers.”
“It should speak volumes that the nation’s largest brick-and-mortar retailer has as a chief ally the nation’s largest online retailer. Wal-Mart and Amazon.com both back an online sales tax because it would impose heavy burdens on smaller online retailers who lack the resources to easily deal with tax collectors from all around the country. An online tax would reduce competition. Wal-Mart sells online and has stores across the country and so already has to collect sales tax on Internet sales. Amazon.com has a physical presence in its major markets and so already must collect sales tax where most of its sales come from.”
“The Supreme Court punted on a case that leaves an important issue unresolved. Allowing states to charge sales taxes to residents of another state represents a significant expansion of state taxing powers while reducing states’ accountability to taxpayers. It is not justifiable to allow a state to charge sales taxes to residents of another state, as the latter have no political voice in the taxing state and receive no government benefits or services.
“While supporters of online taxes may argue these taxes are needed to restore a balance between online and brick-and-mortar retailers, the imposition of sales taxes on Internet sales will only slow the growth of the e-commerce industry. The burden appears to now lie with Congress to address this issue. One reform that must not go forward is the Marketplace Fairness Act, which gives states near carte blanche power to tax out-of-state residents regardless of physical presence.”
The Heartland Institute is a 29-year-old national nonprofit organization headquartered in Chicago, Illinois. Its mission is to discover, develop, and promote free-market solutions to social and economic problems. For more information, visit our Web site or call 312/377-4000.