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February 11, 2016

PITFA Tremendous Victory for U.S. Internet Economy

Congress Should Not Backtrack with Internet Sales Tax

DALLAS - The Institute for Policy Innovation (IPI) commends the U.S. Senate for passing the Permanent Internet Tax Freedom Act (PITFA), which was included in the customs enforcement conference report.
“This is a tremendous victory for America’s Internet economy, and for all of us who participate in this economy,” said IPI president Tom Giovanetti. “States are now prohibited from passing discriminatory taxes on the Internet or from taxing Internet access itself. This will ensure that all Americans have the opportunity to access the Internet without the disincentive of higher costs through taxation.”
“IPI has been fighting for a permanent ban on Internet taxes for at least fifteen years. Over that time, we’ve published scores of policy papers and op/eds, hosted and participated in dozens of briefings on Capitol Hill and in the states, and given hundreds of interviews on talk radio and other media,” said Giovanetti. “The role of the policy community in driving this issue to the forefront and doggedly pursuing it to a successful conclusion cannot be overestimated.”
“In particular, I’d like to thank IPI research fellow Bartlett D. Cleland, who has been a leader on this issue since he joined IPI in 2000, fresh off of his stint working on the issue with the Advisory Committee on Electronic Commerce,” said Giovanetti. “A permanent ban on Internet access taxes and a ban on discriminatory Internet taxes were original recommendations of the ACEC. While it’s disappointing that it has taken this long, today is no doubt a gratifying day for Bartlett and all those who have worked for so long on this issue. “
“Now the battle intensifies to stave off the attempt to impose something even worse than Internet access taxes,” said Giovanetti. “Later this year, those who want to impose unconstitutional  cross-border sales taxes on Internet transactions have been promised a vote.  But this legislation, known most recently as the Marketplace Fairness Act (MFA) but which now parades around disguised as ‘e-fairness legislation,’ has never had committee scrutiny on the Senate side and never been subject to amendment on the floor."

"If the so-called ‘e-fairness legislation’ is to come to a vote, Senate Republican leadership must commit to first submitting this legislation to the same procedures, hearings and scrutiny appropriate to any and all legislation, especially since this proposal has serious Constitutional questions," said Giovanetti.
The so-called ‘e-fairness legislation’ is a grotesque expansion of state tax collection authority that is almost certainly unconstitutional, and places mandates upon the states that are probably unconstitutional as well. “With the passage of PITFA, online merchants and consumers are freed from the threat of discriminatory tax treatment,” said Cleland. “But this does almost exactly the opposite, empowering government tax auditors to reach as far as the Internet sprawls.”
The so-called ‘e-fairness legislation’ would eliminate any requirement that businesses have a physical connection to a taxing jurisdiction before it can be forced to levy taxes on its sales. “If this law were to pass, a person merely calling up a business’s website would be enough to require that business, and hence consumers, pay taxes in the state where the customer resides,” said Cleland. “Out-of-state tax authorities could audit businesses in any state—regulation without representation or reprieve. A discriminatory Internet tax would look promising by comparison.”
Tom Giovanetti is president of the Institute for Policy Innovation (IPI), an independent, nonprofit public policy research organization based in Dallas. Bartlett D. Cleland is an IPI research fellow. Experts are available for interview by contacting Erin Humiston at (972) 874-5139, or


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