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Tuesday, October 18, 2011


This weekend, the Bismarck Tribune came out with an editorial saying much of the same things that NDTA has been saying with regard to the plans to implement federal legislation that would allow states to bind online retailers to collect the tax that consumers technically already owe now under "use tax" law.

 From the Bismarck Tribune:

 The proposed Main Street Fairness Act would misuse taxing authority in much the same way tobacco taxes (to drive up the price of a package of cigarettes) or proposed carbon taxes attempt to change public behavior.


In practical terms, online companies not paying sales tax does give them a competitive advantage. But it isn't necessarily unfair. What would be unfair would be to tax the online companies but give them no service - no benefit, which is what's proposed. In other words, there's no relationship between the proposed tax on online companies and any benefit to those companies.

After several weeks of discussing the Democratic version of the internet sales tax called the "Mainstreet Fairness Act," a Republican version has been introduced in Congress called the "Marketplace Equity Act."

The Marketplace Equity Act is very similar to the Mainstreet Fairness Act.

One main difference is that the Marketplace allows each state to have a single sales tax rate for online purchases rather than each local jurisdiction applying their local sales tax to the sales.  (Local government officials are certain to object to this as it doesn't allow them to increase their tax revenue.)

As the Tax Foundation documents "Unlike the previous version, the bill does not restrict states from making other assertions of expanded state taxing authority over sales tax collection.  And, unlike the previous version, there is no mechanism for litigating against a state out of compliance with the law. The previous version specified that such cases would be heard by the Court of Federal Claims."

From a political aspect, this bill is being introduced in the U.S. House by a Republican, which makes it far more likely to pass than the version introduced by Sen. Dick Durbin in the Senate.  (This makes it much more dangerous).

Last week, NDTA launched an unscientific survey of our email readers, take a minute to take the survey if you haven't already.

The argument made by those who support these efforts is that the customers that buy products online already owe this tax.  The problem is that very few people know what the "Use tax" even is, or that they owe it when they buy online.  Last week, State Senator Dwight Cook and I discussed this very point on Chris Berg's "We the People" radio show (click here and fast forward to the 11:30 mark to listen to that segment).

The solution to this is simple - if people aren't paying tax they owe, and the state law already says they owe it - then, enforce the law!  

This is the job of the Tax Department. 

As the Bismarck Tribune said:

"The advantage online companies have, based on sales tax, isn't unfair. The state has other options for obtaining sales tax dollars from online transactions, means that do not take unfair advantage of online companies."

Instead of enforcing the current law, the State of North Dakota (via legislative support of the Streamline Sales Tax Project and the Multi-State Tax Commission) has opted to give its power to control its tax laws to a multi-state quasi federal entity.  This is not acceptable because North Dakota simply does not need the revenue, and certainly should not be giving lawmaking authority to an un-elected body. 

North Dakota needs to control and enforce its own laws.  

Lawmakers should reconsider involvement in organizations that seek to "harmonize" the laws of various states.  

North Dakota voters should not accept lawmakers attempts to reduce their power to legislate by agreeing to operate the way other states like.  

How can we complain about the power grabs of the federal government when our state government is giving its power away voluntarily? 

Click here to email your elected representatives.


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