The United States Senate recently voted overwhelmingly to proceed with debate on the so-called Marketplace Fairness Act, and scheduled a final vote for May 6. This law, if passed, would authorize states to require Internet-based companies without a physical presence in the state to collect and remit sales taxes to state and local governments, forcing Internet retailers to know and apply thousands of different sales tax laws – potentially one for every state, county and city in America that collects a sales tax.
The problem with this law is that it is a violation of the principle of balanced federalism, and of the spirit of the American Constitution. In order for a state to collect Internet sales taxes, the law would require states to adopt “minimum simplification standards,” because evidently the federal government cannot let sovereign states do anything without also forcing states – I’m sorry, “encouraging” states – to adopt federal standards.
By introducing “minimum simplification standards” for Internet sales taxes, the federal government would be explicitly pushing the idea that it is proper for Washington, D.C. to explicitly influence state and local sales and use tax policies. This idea violates the foundational idea of our federalist system, wherein the federal government focuses on its constitutionally delegated areas of law and public policy (e.g., federal income and excise taxes) and leaves the states, as sovereign entities, to address their areas of law and policy free of federal interference or intrusion (e.g., state and local sales taxes). The federal government has no right to impose “minimum standards” on state and local sales taxes, all twisting of the language of the federal Constitution by legal sophists aside.
Some advocates, including some in Utah, would like to see state and local sales taxes standardized nationwide, and that is their right. However, sacrificing the founding principles of America’s freedom on the Altar of Business in the name of Almighty Commerce would be to sell our nation’s soul for 30 pieces of silver.