Arguments for and against legislation permitting states to tax Internet transactions were heard Wednesday by the House Judiciary Committee’s commercial and administrative law subcommittee.
The measure is one of two Internet-tax related bills sponsored by Judiciary Committee Chairman Rep. Henry Hyde (R-IL) as amendments to the Internet Tax Freedom Act. The first, (HR-4460) introduced Tuesday, requires states to develop one, simplified sales tax system for taxing Internet transactions.
The second (HR-4267) introduced on April 13, prohibits states from imposing taxes on Internet sellers not physically located within their borders.
At the first of several hearings on the two measures, Dallas, TX, Mayor Ron Kirk strongly endorsed HR-4460, saying that state and local governments “are simply calling for equal treatment of similar products, whether they be purchased on line, or from traditional brick and mortar retailers.”
Kirk also called on Congress to legislatively fix the tax collection system saying that legally, the use tax is due on goods and services purchased over the Internet. He urged lawmakers not to shift the tax burden “onto our local Main Street merchants and individual taxpayers.”
ACEC member Paul Harris countered that governments “must curb their insatiable appetites for expanded tax authority.” He said the aggressive and complex taxation of the Internet will obstruct its growth.
Stanley S. Sokul, another anti-tax ACEC member, urged the panel to consider the international ramifications of giving states the authority to tax Internet transactions. He said that that “unless Congress approves an international tax collection treaty a new state Internet tax system could not be enforced internationally.” He also said it could have a serious effect on U.S.-based businesses and the national economy.
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