Contact: Sonia Hoffman: (888) 557-4474 or shoffman@ipi.org

Dallas, TX: Anyone who makes purchases using the Internet or telephone should raise a concerned brow at Congress’ newest movement to permit states to force merchants to collect sales taxes from beyond their jurisdiction. Allowing states to tax the citizens of other states is not only unconstitutional, but would never have been permissible by the Founding Fathers.

“The problem with any proposed plan to allow states to ‘simplify’ their state and local sales and use tax systems into nationally uniform schemes through federal government encouragement is that there is nothing simple about it,” says Bartlett Cleland, Director of the IPI Center for Technology Freedom at the Institute for Policy Innovation (IPI).

Constitutional difficulties arise, for example, because current law prohibits states from taxing businesses that have no presence within the state. Otherwise, states would be able to tax citizens of other states and those citizens would have no democratic (electoral) recourse.

Continues Cleland: “A better solution is to make permanent the Internet tax moratorium—which prohibits taxes on Internet access or discriminatory Internet taxation—and to block future efforts by state cartels to fill their coffers by taxing residents of other states.”

What most people don’t realize is that the current moratorium doesn’t prohibit states from collecting taxes on e-commerce. The states have always been able to enforce use taxes, which require residents to pay their state's sales tax on out-of-state purchases.

Furthermore, states’ sales tax revenues aren’t suffering due to increasing online retail sales. Just the opposite has occurred -- earnings have steadily grown.

Taxing Internet commerce is not only complicated, but just plain wrong.