Texan Politicians Push Tax Increase On Internet Sales

In view of the ongoing IRS scandal, Republicans should stay away from creating large, burdensome, taxing organizations. However that is just what some Texas Republicans are trying to do with the Marketplace Fairness Act, or MFA.

Republicans in Texas are supporting this bill as a way to close a “tax loophole.” You cannot make this up, they believe a tax increase will create lower taxes.Ironically, taxes in Texas produced a surplus last year with Texas Governor Rick Perry returning wealth to Texans due to the budget surplus.

MFA was introduced by Congress in February 2013, marking the second time Capitol Hill tried to shove a confusing, overbearing, and unconstitutional tax down American taxpayers throats after a previous bill of the same name had died in 2011. Passage of MFA would allow states to charge sales tax on items the consumer has purchased from an out of state online retailer. So, if you live in Texas and buy goods from Oklahoma, you will pay Texas taxes.

Large businesses like Amazon will benefit from MFA because it makes business harder for smaller startup companies. There are 9,600 different taxing entities in the United States already assaulting entrepreneurs. That means small businesses will have to hire tax lawyers, and infrastructure to deal with this massive increase in what can only be described as costly “tax busy work.” The cost of compliance with all these tax codes according to an independent study by TruST is $57,000 to $290,000, this severely limits small businesses ability to use E-commerce and prohibits market entry.

MFA will not help local business or local ecommerce.  Its costs will burden Texan tax payers with additional income loss and the only thing it will lower are the number of small businesses entering the Internet sales market.  It is also just another opportunity for lawmakers to stomp on the Constitution in an effort to get more of your income. 

Internet commerce is a relatively new business model, and much like everything else, the government wants to tax it. Unfortunately this time it’s state government. Already, Texas has over bearing taxes on technology, such as its ludicrously high 17.33% tax on wireless goods and services, as well as charging taxes for products that simply update business software. MFA is just a continuing extension of government taxation new digital age services and products.

While most arguments these days point a well-deserved finger at the federal government for ignoring the Constitution, MFA now places state governments in the awkward position of going against Constitutional framework.

MFA would allow a state governing board the authority to exercise federal taxing power throughout the United States in dealing with audits and other governmental powers associated with collecting sales tax. States being able audit each other at will is not scary enough, this is also a clear violation of the Compact Clause which can be found in Article I, Section 10 of the Constitution. The Compact Clause limits states’ ability to band together and promulgating law in several states. Greedy states seek to use MFA to confiscate even more taxpayer dollars.

In addition, MFA breaks well established physical presence laws established by the Supreme Court in the Quill V. North Dakota case. In this case an eight to one decision was reached where it was found unconstitutional to charge a company without physical nexus inside a particular state where employees work, have a warehouse, or other presence for products sold from within its borders.

Perhaps worse, MFA is in direct conflict of the Commerce Clause a legal precedent derived from Article I of the US Constitution. The Commerce Clause gives the federal government the direct purview to tax interstate commerce, with such taxing privileges not reserved for the states. However, MFA gives states the rights to sole collection of Internet sales taxes and regulation of such taxes, making it in clear violation of the Constitution.

The good news for Texans is that taxes for most major online businesses are already collected. The online giant Amazon already has physical presence in Texas as well as other large E-retailers such as Best Buy, Target, and Walmart.

Republicans should stop looking to tax their constituents, and should instead be concentrating on the novel idea of promoting prosperity and growth by taxing them less.​