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Taxation without representation
July 17, 2013 by atm Atom — blogger, atmatom
In December 1773, British tea was dumped into Boston Harbor by the Sons of Liberty in response to the Tea Act passed by British Parliament as a tax on the American colonists.
The strong objection to this tax by the American colonists was that it imposed "taxation without representation" — taxes levied by a legislative body in which they had no input. Further escalation of this protest ultimately resulted in the American Revolution and the birth of our nation.
Nearly two hundred and forty years later, American businesses face the same threat, only this time from within our own nation.
The House of Representatives is currently debating what is euphemistically entitled the "Marketplace Fairness Act," forcing online merchants to collect sales taxes on all Internet purchases.
This piece of legislation has already passed in the Senate and the insatiable appetites of taxing authorities everywhere have them howling and scratching at the door for final House approval. Many have already assumed collection of this revenue in future budgets.
To be clear, I am not arguing that Internet sales should be made free of tax. "Brick and mortar" merchants pay taxes on sales under the jurisdiction of the cities, counties and states where they operate. Internet merchants pay taxes on sales to customers located in the same cities, counties and states as the seller.
The common thread here is that under current law, merchants have representation where they collect and pay taxes. They also benefit in a number of ways through services provided to them by these same government entities.
Tax laws in most states currently require Internet customers — you know, the ones who have representation and receive municipal services — to disclose Internet purchases and to voluntarily pay taxes on those purchases.
Widespread ignorance or avoidance of Internet tax laws by consumers has meant that these taxes have gone largely uncollected. This leaves the taxing authorities with the uncomfortable task of cracking down on the very constituents who vote them into office.
The alternative is to turn a blind eye towards the historical mandate of taxation with representation, letting Congress strong arm Internet businesses into collecting taxes for them.
Requiring online merchants to collect taxes on all sales, complying with the rules, regulations, reporting requirements and audit processes of an estimated 10,000 taxing entities nationwide is among the most anti-business, job-killing piece of legislation to come out of Washington.
The costs of compliance for all but the largest web-based merchants will be crushing, which is why it should be renamed the "Big Box Retail Protection Act." Ironically, the legislation has drawn little, if any, protest from the likes of Amazon or any of the mega-Internet retailers who are large enough to be able to afford the outsized compliance costs.
The vast majority of web-based businesses are small to medium-sized purveyors of specialty goods (i.e., ATM parts), with national or global customer bases that cannot be served economically through the "bricks-and-mortar" business model.
Other web-based businesses have attacked narrow segments of the large retailers' offerings, competing more efficiently without the associated overhead. While tax-free has undoubtedly benefitted Internet commerce, it is not the sole reason for the explosive growth of this segment.
It is the crippling of these nimble competitors through this outsized regulatory burden — while eliminating any tax treatment disparity — that has united the big box retailers, mega-Internet participants and government under the mantra of "fairness."
Proponents of the bill will point to the fact that there will be "exemptions" for Internet retailers below a certain size. Can there be a stronger disincentive for growth and job creation than avoidance of whatever the ultimate threshold might be?
Proponents will also tout the "to be developed" compliance software which supposedly will automate all tasks, making tax collection, disbursement, reporting and audit compliance painless. These are nothing more than talking points assembled by advocates, most of whom have never run a business of any size.
Ironically, more than 237 years after tea was found floating in Boston Harbor, passage of the "Marketplace Fairness Act" threatens to reinstitute "taxation without representation" — an odious burden that was our original grounds for breaking with England.
This article has been republished from the Triton blog, atmAToM, with kind permission from Triton.
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