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Senate Attaches Internet Sales Tax to Federal Budget Process
New York, NY, March 19, 2013 — The Direct Marketing Association (DMA) opposes a proposed amendment to the FY 2014 Federal Budget that would endorse the Marketplace Fairness Act (Act), a new Internet sales tax. DMA asserts that the Act, including the section codifying the Streamlined Sales and Use Tax Agreement, does not provide the needed harmonization across state taxing structures. Neither does it sufficiently reduce the deficiencies that led the Supreme Court in its 1992 Quill v. North Dakota decision to restrict states from requiring remote sellers to collect sales tax in the first place. Endorsement of the Act should not be considered in discussions on the Federal Budget.
This Act would grant states the authority to reach beyond their borders to conscript American businesses with no presence in the state and force them to become the unpaid tax collectors for the state. This is bad policy, as it interferes with the free-flow of commerce among the states, a principle upon which the United States was founded. In these difficult economic circumstances, placing new, unfunded mandates on out-of-state companies to comply with complex and changing tax structures, tax holidays, and tax thresholds in many states around the country will hamper e-commerce, a fast growing segment in our economy.
The Act, which purports to simplify the American sales tax system, actually expands it. The Act allows:
• States to maintain nearly 10,000 local sales tax jurisdictions with their own tax rates, tax holidays, and thresholds;
• 46 states to conduct their own audits of conscripted American businesses across the country (requiring those businesses to hire tax attorneys, etc.);
• 46 states to create their own definitions of what each taxable good is (how much juice in a drink is needed to not be classified as a soft drink, for example);
• 46 states to interpret key terms for collection of sales tax, such as defining a “sales price”; and
• 46 states to create their own tax returns, filing schedules, and deadlines.
This Act also enters a troubling area by allowing the long-arm of state taxing authority to grab non-citizen businesses. There is no preemption of state attempts to stretch sales and use tax laws beyond their borders to hook out of state businesses. The Marketplace Fairness Act allows such action. This is a dangerous road — one which should not be taken.
“The Senate should not take this dubious road without full consideration,” said Jerry Cerasale, DMA’s senior vice president of government affairs. “State sales taxes are a morass of complicated definitions, rates, thresholds, tax holidays, filing procedures, registration procedures, etc. Endorsing throwing ecommerce into that briar patch without full consideration is wrong and should be avoided.”
About Direct Marketing Association (DMA)
The Direct Marketing Association is the world’s largest trade association dedicated to advancing and protecting responsible data-driven marketing. Founded in 1917, DMA represents thousands of companies and nonprofit organizations that use and support data-driven marketing practices and techniques.
In 2012, marketers — commercial and nonprofit — spent $168.5 billion on direct marketing, which accounts for 52.7 percent of all ad expenditures in the United States. Measured against total US sales, these advertising expenditures generated approximately $2.05 trillion in incremental sales. In 2012, direct marketing accounted for 8.7 percent of total US gross domestic product and produces1.3 million direct marketing employees in the US. Their collective sales efforts directly support 7.9 million other jobs, accounting for a total of 9.2 million US jobs.
DMA’s most current initiative is the Data Driven Marketing Institute (DDMI), which advances and protects data-driven marketing by engaging the entire industry in a coordinated campaign to set the record straight about the countless ways that data-driven marketing benefits consumers and fuels the data-driven economy.
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