The Internet Tax Freedom Act, H.R. 1054 and S. 442, would call time-out on taxes that discriminate against electronic commerce and the Internet. The ITFA would institute a moratorium to preclude double taxation of electronic commerce and taxation that singles out the Internet for excise-type taxes.
For consumers and taxpayers, the ITFA addresses three important points.
Internet sales would be treated like mail-order sales. The ITFA would prevent discrimination against the Internet. It would not give the Internet a tax preference. Under this legislation, the taxation of sales made over the Internet could not be taxed more than sales made in a store or through a catalog.
The Commerce Clause of the U.S. Constitution provides taxpayer protection. This protection does not disappear with new technology or new business models. The Supreme Court has made clear that the Constitution does not allow state and local governments to tax activity that occurs outside of their jurisdiction. While the ITFA preserves state authority to tax electronic commerce, it protects consumers from extraterritorial taxation.
The ITFA would prevent a “race to the bottom.” By taxing consumers and transactions that are out-of-state, a few states could encourage all states to race toward new taxes. For example, if state A taxes consumers in state B, then state B has an incentive to tax state C. A chain-reaction could continue until everyone is taxed to death. The ITFA’s moratorium prohibits any new state or local taxes that would initiate such a race to the bottom.
The Internet Tax Freedom Act may go to the floor of Congress this month. To cosponsor this legislation, contact Peter Uhlmann at 225-5611 in the House or Carole Grunberg at 224-5244 in the Senate.