Two weeks ago we focused on the “Amazon tax” case in Illinois, where the state Supreme Court found the Illinois “click through” nexus law was unconstitutional.
The law required online marketers to collect the tax, but did not require the same for more “traditional” marketers, and thus ran afoul of the federal Internet Tax Freedom Act (ITFA), which prohibits multiple or discriminatory taxes on the Internet.
Yet other states continue to push forward with similar proposals, and top Illinois tax officials are still seeking a way to collect the discriminatory tax.
But the Amazon tax is only the beginning; other proposals and enacted policies clearly also discriminate. The so-called “Marketplace Fairness Act” allows a state taxing scheme that requires more work, increased cost, greater liability and expansive audits for online merchants that brick and mortar stores would not have to face.
This scheme greatly expands the power of each state’s department of revenue, making it easier to shake down out-of-state businesses in the states’ relentless quest for more revenue. For example, New York could summon a Texas merchant to defend itself in a New York court. How much easier to just pay the demand rather than to spend the time and resources to fight it? This discriminatory tax leads directly to discriminatory results.
The use of mobile devices of all kinds has expanded rapidly, and the mobile industry has been punished for its success. State tax authorities have seized the opportunity, taxing telecommunications services via monopoly-era utility taxes causing tax rates on mobile “phones” to skyrocket. Nationally, the average tax rate on wireless service is now at extortion levels of 17.2 percent, or 232 percent higher than the 7.4 percent average sales tax rate imposed upon other goods and services.
Many jurisdictions have moved to ban texting, or other mobile device uses, while driving. Not a bad idea, except why not simply ban all distracted driving and subject every instance to the same penalty rather than singling out technology?
Those who propose policies that are understood to discriminate against the Internet or technology in general take a huge risk. As the “SOPA/PIPA” debate demonstrated, proposed laws that are viewed as attacking the Internet are un-liked by the growing Internet community, as more and more people adopt broadband and increasingly use it as part of everyday life.
November 7, 2013