Happy New Year: Action on Internet Taxes Looms Large for 2014

Michi Iljazi

January 2, 2014

The beginning of the year starts with Congress still on vacation, and as they prepare to return next week one major issue that the Taxpayers Protection Alliance (TPA) will be looking for action on will be Internet taxes, and not just usage but also the commerce that occurs regularly nationwide. Access to the Internet is extremely important and taxing the internet by adding certain usage fees (state and/or federal) is harmful to everyone in America who goes online, and in this technological age you’d be hard-pressed to find someone who doesn’t access the internet on a daily basis. The Internet has become such a crucial part of how we live our lives and impacts so many things that individuals, small businesses, and major corporations do that it’s important not to hinder that access with excessive taxation.

Leaving 2013 behind and recognizing that there were both victories and defeats for taxpayers is important in looking at 2014 and what may be in store. Internet taxes is definitely something to pay very close attention to in this new year and the important developments in 2013 that set the tone are a perfect reminder of why this year could be very favorable to anyone who uses the internet. In September, TPA was pleased to see the bipartisan Permanent Internet Tax Freedom Forever Act introduced in the House by Judiciary Chair Rep. Bob Goodlatte (R-Va.) and Rep. Anna Eshoo (D – Calif.), Rep. Spencer Bachus (R-Ala.), Rep. Steve Cohen (D-Tenn.) and Rep. Steve Chabot (R-Ohio). The bill was a follow-up to the August introduction in the Senate of the bipartisan Internet Tax Freedom Forever Act from Sens. Ron Wyden (D-Ore.) and John Thune (R-S.D.).

The House version permanently extends the moratorium on Internet access taxes and prohibits multiple and discriminatory taxation of Internet commerce. The Internet Tax Freedom Act (ITFA) was first enacted in 1998 and since then the Internet has become one of the primary forces driving commerce in today’s global economy.  TPA applauds both the House and Senate bills to make permanent the spirit for which the ITFA was originally enacted.

Another important area to look at is the taxing online purchases.  The Senate passed the Marketplace Fairness Act (MFA) last year and TPA was vehemently opposed to the legislation.  TPA was active in coalition efforts in both the House and Senate to stop MFA. Taxpayers and consumers shouldn’t be the target of government schemes aimed at higher taxes that ultimately do more harm than good.

This year could be a make or break year for those looking to get the Internet Sales Tax through Congress and to President Obama’s desk.  With the end of the holiday season, it’s important to look at just how bad the Internet Sales Tax would be for the economy. “Cyber Monday” which fell on December 2 (the first Monday after Thanksgiving) saw sales of $2 billion (according to Bloomberg). That is a 33 percent increase from the $1.5 billion spent on the 2012 “Cyber Monday.”  Amazon reported that customers ordered 37 million items on Cyber Monday. That figure is 39 percent higher than last year’s peak day.

Despite what supporters claim, the Internet Sales Tax is bad policy for taxpayers, consumers and businesses nationwide. It would dismantle proper limits on state tax collection authority while causing serious damage to electronic and interstate commerce.  The Internet Sales Tax would also create a decidedly “unlevel” playing field between brick-and-mortar and online stores. Brick-and-mortar stores across the country are governed by a simple rule that allows the business to collect sales tax based on its physical location, not that of the item’s buyer. The “Marketplace Fairness Act,” would deny online sellers that convenient collection standard, forcing remote retailers to interrogate their customers about their place of residence, look up the appropriate rules and regulations in thousands of taxing jurisdictions across the country, and then collect and remit sales tax for that distant authority.

With 2014 in full swing, the Taxpayers Protection Alliance remains vehemently opposed to Internet taxes on access and commerce. Efforts to stop these harmful policies will continue so that taxpayers can enjoy the Internet without worrying about excess taxes from state governments and the federal government merely trying to squeeze more money to spend in any way they see fit.