Reportedly relying on trade groups, taxpayers, industry, and state governments the House Judiciary Committee announced 7 basic principles on remote sales tax collection. Chairman Goodlatte made the announcement to allegedly begin the discussion on the looming problem of Internet sales tax.
The 7 basic principles, announced, are:
1. Tax Relief – Using the Internet should not create new or discriminatory taxes not faced in the offline world. Nor should any fresh precedent be created for other areas of interstate taxation by States.
2. Tech Neutrality – Brick & Mortar, Exclusively Online, and Brick & Click businesses should all be on equal footing. The sales tax compliance burden on online Internet sellers should not be less, but neither should it be greater than that on similarly situated offline businesses.
3. No Regulation Without Representation – Those who would bear state taxation, regulation and compliance burdens should have direct recourse to protest unfair, unwise or discriminatory rates and enforcement.
4. Simplicity – Governments should not stifle businesses by shifting onerous compliance requirements onto them; laws should be so simple and compliance so inexpensive and reliable as to render a small business exemption unnecessary.
5. Tax Competition – Governments should be encouraged to compete with one another to keep tax rates low and American businesses should not be disadvantaged vis-a-vis their foreign competitors.
6. States’ Rights – States should be sovereign within their physical boundaries. In addition, the federal government should not mandate that States impose any sales tax compliance burdens.
7. Privacy Rights – Sensitive customer data must be protected.
While the comments, in theory, seem all well and good, the Judiciary Committee did not offer much guidance. For example, how can it be said that Brick & Mortar businesses should not have different compliance burdens? Or how can government not shift onerous compliance requirements onto companies by enacting an Internet tax in the first place? Is that not the root of the problem?
It is important that the Judiciary attempts to move in some direction to clarify Internet tax law, however, there still seems to be significant uncertainty as to how to accomplish its enactment. It also furthers the notion that the lawmakers are out of touch with the true problems created by any Internet tax legislation.
About the author: Mr. Donnini is a multi-state sales and use tax attorney and an associate in the law firm Moffa, Gainor, & Sutton, PA , based in Fort Lauderdale, Florida. Mr. Donnini’s primary practice is multi-state sales and use tax as well as state corporate income tax controversy. Mr. Donnini also practices in the areas of federal tax controversy, federal estate planning, Florida probate, and all other state taxes including communication service tax, cigarette & tobacco tax, motor fuel tax, and Native American taxation. Mr. Donnini is currently pursuing his LL.M. in Taxation at NYU. If you have any questions please do not hesitate to contact him via email JerryDonnini@Floridasalestax.com or phone at 954-642-9390. Please also visit his blog , Facebook, and Twitter.