TPA Joins Coalition Urging Opposition to Indiana Tax Bill

Michi Iljazi

February 20, 2017

As states look to ways to contain or fix looming budget shortfalls, there are a number of legislatures around the country that are looking to raise taxes in a number of ways that will only harm consumers and taxpayers, while likely falling short on projected revenue leaving the states in a position where taxpayers will continue to be at risk from lawmakers eager to fill the remaining budget gaps. In Indiana, lawmakers are considering a new sales tax bill that is not only unconstitutional, but will discourage entrepreneurs from doing business in the state of Indiana and will likely result in retaliatory measures from tax-heavy states including nearby neighbor Illinois. TPA signed a letter to Indiana lawmakers sent by the R Street Institute opposing the bill, S.B. 545 and TPA will continue to fight against any attempts to increase taxes in the states and at the federal level. 

You can read the full letter below:

An Open Letter to the Indiana House of Representatives: Reject S.B. 545’s Unconstitutional Tax Grab

Dear Indiana Representative,

On behalf of the millions of members of the undersigned organizations, including thousands of Indiana residents and taxpayers, we write in strong opposition to S.B. 545, which would require online businesses located outside Indiana to remit sales taxes to the state. This legislation is both unconstitutional and unwise and should be rejected.

This bill and similar approaches to interstate sales taxes hold an ignominious distinction: they are the only such efforts in recent memory to be intentionally drafted so as to be unconstitutional and draw a lawsuit. By empowering Indiana to collect taxes from businesses with no physical presence within your borders, the rule would immediately draw Indiana into a potentially expensive and bitter cycle of litigation that is duplicative of similar cases in other states. It’s a cycle unlikely to yield a positive result, since decades-old Supreme Court precedent makes clear that state tax powers stop at the border’s edge.

Setting aside the bills’ obvious unconstitutionality, it is decidedly unwise for Indiana. By contributing to the erosion of borders as effective limits on state tax power, it will encourage poorly-governed, tax-heavy states like California, New York, and Illinois to unleash their aggressive tax collectors on Indiana businesses. Your own constituents could be subject to audit and enforcement actions in states all across the country in which they have no physical presence.

Furthermore, a system of sales tax enforcement unbounded by any tangible connection like a physical presence would impose significant compliance costs on web-enabled businesses. This burden would fall particularly hard on specialty businesses and small sellers that are dependent on the internet to reach their customers. They would be forced to keep track of all 10,000 taxing jurisdictions across the country, each with its own rates, rules and regulations, while sales in similar brick-and-mortar businesses only require collection of tax for the single jurisdiction in which they’re located.

The U.S. Constitution was written to replace the Articles of Confederation in no small part due to the latter’s failure to prevent a spiraling interior “war” of states who could assert tax and regulatory authority outside their borders. While the Constitution’s Commerce Clause and subsequent jurisprudence make clear that taxing power must be limited by state borders, this bill seeks to wipe those limits away. That would be dangerous and we urge that you and your fellow legislators act to stop it. 

Sincerely,

Andrew Moylan, R Street Institute

Norm Singleton, Campaign for Liberty

Jeffrey L. Mazzella, Center for Individual Freedom

JessicanMelugin, Competitive Enterprise Institute

Wayne Brough, FreedomWorks

Lisa B. Nelson, The Jeffersonian Project

Pete Sepp, National Taxpayers Union

David Williams, Taxpayers Protection Alliance

Judson Phillips, Tea Party Nation

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