It was refreshing to see bi-partisan support by 75 senators to include a version of the Marketplace Fairness Act (MFA) legislation in the budget resolution. The legislation will enable state and local governments to collect sales taxes from online purchases. Opponents claim such legislation unfairly punishes online retailers for their success but, more likely, proponents assert that the legislation actually restores fairness by eliminating an unfair advantage enjoyed by online retailers over brick-and-mortar retailers for more than a decade.
Other opponent objections range from high-minded assertions of MFA violating the commerce clause of the US constitution to in-the-weeds observations of how the imposition of such a tax will cause an undue accounting and regulatory compliance burden on online retailers not shared by their brick-and mortar counterparts. Opponents also speculate that the imposition of sales taxes for sales occurring outside a government’s jurisdiction could lead to higher sales tax rates and the expansion of government authority generally, which small-government supporters oppose.
The recent super majority bi-partisan support is a testament to the palpable, practical and imminent need to amend current sales tax law, as compared with the philosophical, speculative and administrative objections raised in opposition to the new tax. Administrative and regulatory ease should be an obvious goal and is a legitimate concern for any new tax, but its apparent inconsistency with the US constitution should not be used as an expedient excuse for opposition. The ability to amend our constitution in accordance with our natural evolution as a nation is one of its most extraordinary features. Although constitutional amendments are few and infrequent, certainly even the founding fathers would have to admit that the internet and its profound and ubiquitous effect on our lives is a legitimate “game-changer” warranting special consideration, and comparable in scale and scope as the introduction of fire, the wheel and the printing press were to our ancestors.
The fact is that unless and until such time as we can live a virtual reality in cyberspace, we need to build and maintain our communities, and sales tax revenue is an important component of the funds available to meet those requirements. Sales tax and property tax revenue typically account evenly for approximately 70 percent of total state and local tax revenue. With the explosion in online retail sales in recent years and its continued growth trajectory, the prospect is limited for growth in brick-and-mortar sales tax and property tax revenue. Online retailers are at least partially responsible for the growing loss of state and local tax revenue already strained by our struggling economy. Taxing online sales seems like a natural solution to this urgent and growing problem.