As the Senate Finance Committee continues to discuss proposals to reform America's complex tax code, U.S. Senator Kelly Ayotte (R-NH) is urging the committee's leaders to ensure any tax reform proposal keeps the Internet free from burdensome tax requirements and restrictions. In a letter to Chairman Max Baucus (D-MT) and Ranking Member Orrin Hatch (R-UT), Senator Ayotte renewed her opposition to proposed online sales tax legislation and expressed support for making permanent the current moratorium on Internet access taxes. Ayotte also said that any tax reform proposal should make the nation's tax code simpler, fairer, and more pro-growth.
Senator Ayotte has led the fight to protect New Hampshire Internet businesses from legislation that would allow states to force online retailers to collect sales taxes for states in which they do not have a physical presence. She took to the Senate floor several times this year in opposition to the Marketplace Fairness Act (S. 743), bringing the concerns of New Hampshire online retailers to the debate on Capitol Hill. Last Congress, she introduced a bipartisan resolution expressing the sense of the Senate that no federal legislation should give states the authority to impose any new burdensome or unfair tax collecting requirements on Internet businesses and entrepreneurs.
Ayotte is also cosponsoring the Permanent Internet Tax Freedom Act (S. 31) that would permanently extend the current ban on Internet access taxes.
AYOTTE LETTER TO FINANCE COMMITTEE:
July 26, 2013
Chairman Baucus and Ranking Member Hatch:
As the Finance Committee considers proposals to reform our nation's complex tax code, I urge you to support efforts to keep the Internet free from burdensome new taxes and tax restrictions.
Congress should enact measures that are designed to promote innovation and entrepreneurship. Unfortunately, in May, the Senate adopted the so-called Marketplace Fairness Act (S. 743), which would allow a state to force online retailers to collect and remit sales tax to it, even if the retailer has no physical presence in that state. As you know, under current Supreme Court precedent, in the absence of a sufficient nexus, a state cannot reach beyond its borders to compel out-of-state Internet vendors to collect taxes on a particular transaction. This standard is the result of the 1992 decision Quill v. North Dakota, in which the Court held that requiring remote vendors to collect such taxes would place an unconstitutional burden on interstate commerce. By usurping this standard, the Marketplace Fairness Act would undermine the important nexus protection of the Commerce Clause.
Further, the bill would result in crippling new costs on small Internet businesses because they would have to comply with approximately 9,600 different tax jurisdictions across the nation. In addition to higher operating costs associated with new collection and remittance requirements, small businesses will also be on the hook for expensive audits and legal bills if there are any errors in the thousands of tax calculations and distributions they must make every day. For these reasons and more, tax reform efforts should not include new authority for states to collect sales tax on remote online sales.
In addition, earlier this year, I introduced legislation that would permanently extend the current ban on Internet access taxes. The Permanent Internet Tax Freedom Act (S. 31) would prevent state and local governments from imposing new taxes on Internet access, and prohibit any multiple or discriminatory taxes on e-commerce.
As you know, the Internet Tax Freedom Act, originally enacted in 1998, was designed to prevent state taxes on Internet access, to ensure that multiple jurisdictions could not tax the same electronic commerce transaction, and to ensure that commerce over the Internet would not be singled out for discriminatory tax treatment. The current moratorium is scheduled to expire in November 2014.
E-commerce is thriving largely because the Internet is free from burdensome tax restrictions. Any tax reform proposal should provide certainty to the marketplace, and ensure that the Internet continues to be a driving force for jobs and growth.
Congress has the opportunity to transform our complicated tax code into one that is simpler, more competitive and more pro-growth. To do so effectively, I believe that we must eliminate inefficient and unfair loopholes and lower rates across the board. I urge you to consider these important issues as you continue discussions about reforming our nation's tax code.