My Turn: Trouble is lurking for state’s online retailers
Without congressional action, a key law that prevents state and local governments from imposing new taxes on internet access services will expire in November.
For 16 years, the Internet Tax Freedom Act has prevented politicians nationwide from using the Web as a piggy bank and helped e-commerce thrive by keeping it free from burdensome tax restrictions. Passing legislation to extend the prohibition on new internet access taxes should be approved immediately, and it should be made permanent.
But how’s this for irony: Senate Majority Leader Harry Reid, a Nevada Democrat, and Sen. Dick Durbin, an Illinois Democrat, want to hold the renewal of this common sense law hostage in order to pass the onerous and grossly misnamed Marketplace Fairness Act, which in reality should be called the “Internet Sales Tax Collection Act.” It would turn New Hampshire’s online retailers into sales tax collectors for 45 states across the country that impose sales taxes.
Here in the Granite State, we understand that our lack of a sales tax is a source of economic strength that helps create jobs. But most other states see sales taxes as a way to fund bigger government – and they consider online businesses a new source of tax revenue to plug budget holes.
Enactment of federal online sales tax legislation would have serious consequences for internet businesses in New Hampshire and across the nation.
For starters, our state’s online businesses would be forced to calculate, collect and remit sales taxes for nearly 10,000 tax jurisdictions – a daunting task that an online retailer from Portsmouth told me he simply doesn’t have the time or manpower for. Instead of selling products online, he said he’d only be able to post a product catalog on his company’s Web site – a move that could shrink the size of his business, along with his ability to hire more workers.
New Hampshire’s online retailers would also be open to audits from thousands of municipalities nationwide – presenting compliance and legal costs that could easily skyrocket. Picture it: an online retailer in Somersworth having to defend itself against an audit from tax collectors in faraway places like Springfield, Illinois.
The result is as predictable as it is tragic: It may be cheaper and easier for a business to stop selling online or stop growing rather than hire lawyers to fight money hungry regulators in other states.
We all know that the internet has been a bright spot in our sputtering economy, bringing down barriers and opening up new markets for entrepreneurs. An online business in a rural area of New Hampshire can sell products to customers across the country and around the world. While politicians in other states see these businesses as a new source of tax revenue, here in New Hampshire we know what these retailers really are: a source of jobs and income for the families they support.
As Congress prepares to renew the “Internet Tax Freedom Act,” we have to put the focus back on the operative word – freedom. That means stopping internet access taxes – and stopping burdensome online sales taxes that will harm online retailers in the Granite State and nationwide.
(Kelly Ayotte of Nashua is a member of the Senate Commerce Committee.)