Senator Michael Enzi (R-WY) has crafted the Marketplace and Internet Tax Fairness Act (MITFA) in hopes of forcing the controversial Marketplace Fairness Act (MFA) through Congress by holding hostage the widely agreed upon Internet Tax Freedom Act (ITFA). Supporters of Internet freedom, including Americans for Tax Reform and Digital Liberty, have sent a letter to Congress reiterating the problems with MFA and urging them to keep ITFA and MFA separate during consideration of these two consequential issues.
Internet usage taxes, prohibited by ITFA, and an Internet sales tax, promoted by MFA, are different issues that must be addressed one a time. Permanent extension of ITFA has the support of the American people and should be passed before November elections. Action regarding an Internet sales tax, an issue drawing more debate, should not hold ITFA hostage. Refraining from combining these topics will ensure the continued convenience, effectiveness, and ingenuity that have made the Internet a central driver of both our lives and our economy.
Congressmen on both sides of the aisle agree that an Internet tax is a restrictive measure that will inhibit a free market and the innovation that the Internet provides. Originally passed in 1998 and thrice extended since, ITFA has allowed the Internet to grow and prosper. Further proliferation of the Internet can be encouraged by extending ITFA permanently. The Internet was created as a means of free communication and exchange of ideas, goods, and services. Regulating Internet use through a tax will impede the continued development of such expression and improvement. If previous regulation of industry (water, electricity) tells us anything, we know that government intervention does more harm than good. Clearly ITFA should be extended permanently.
While the continuance of ITFA is a clear-cut essential, the issue of sales tax concerning out-of-state sales over the Internet is a different and far more hotly debated issue. MFA (S. 743) passed the Senate in May 2013 but has been held up in the House due to concerns over tax hikes and the sovereignty of states. MFA seeks to give states cross-border tax authority for businesses located outside their jurisdiction, effectively letting each individual state impose their tax ideology on any of the other 49. Previously, states have been protected from the whims of out-of-state tax collectors through the “physical presence standard.” This standard controls the regulatory power of each state by not allowing it to spread beyond its borders. The MFA would ultimately increase interstate tax complexity by forcing companies to reconsider the tax regulation that would stem from doing business in 50 different states.
These are undoubtedly two separate subjects. The permanent extension of ITFA has a large following, while MFA has two divided sides. In order to tip the scales on the MFA question, Senator Enzi and his co-sponsors have added ITFA to the equation in order to produce MITFA, a convoluted amalgamation of two separate issues. MITFA would only extend ITFA ten years, at which point its lengthening would once again be used as a political bargaining chip. Senator Enzi and his supporters seek to raise taxes through MFA by combining it with ITFA, an issue of monumental importance. Defenders of Internet freedom need to hold strong and demand that these issues be faced apart from each other.
Americans for Tax Reform and Digital Liberty urge Senators and Representatives to pass a clean permanent extension of the Internet tax moratorium before November 1st.