A federal internet sales tax is the goal of city resolutions

A federal internet sales tax is the goal of city resolutions

By David Ferguson


Are you ready for the IRS to administer a sales tax?  The Arkansas Municipal League is pushing cities to pass resolutions urging the Arkansas Legislature or Congress to pass an internet sales tax.

What reason is being given for a new internet sales tax that has been estimated to take $100 million or more out of the pockets of Arkansas consumers? The dream being sold is the hope an internet sales tax would “level the playing field” for local businesses by making those out-of-state sellers who have no physical presence in Arkansas collect a sales tax. Small businesses owners may think it sounds like a good idea, until they realize the dream doesn’t reflect reality.

The ultimate goal of the effort is a FEDERAL tax. An Arkansas tax  will not work for two reasons

  1. It is unlikely the U.S. Supreme Court will reverse their long-standing precedent which prohibits a state from making out-of-state sellers collect its sales tax when the business has no facilities in the state.
  2. Even if the court upheld an Arkansas internet sales tax, other states would quickly follow suit. That means Arkansas small business would have to comply will the internet sales taxes of numerous other states. The expense of trying to comply with the tax laws and regulations of every state into which you ship items would be a big barrier for a small business wanting to enter the internet market. The winners would be the huge corporations like Amazon and Walmart because they would have less internet competition from small business.

Backers who have pushed the Arkansas legislature and the Arkansas Municipal League to buy into the tax, know a state level tax won’t work, but include that state tax idea because if states try to pass their own internet sales taxes it will show Congress there is support for an internet tax and proponents will urge Congress to pass one.

Even passage of a FEDERAL tax will not level the playing field.  Why? Arkansas has one of the higher sales tax rates in the country. Do you think the Feds would use Arkansas’ high rate for a federal internet sales tax? Of course not. Other states wouldn’t stand for it. Especially the four states that do not have a state sales tax. Therefore, even a FEDERAL tax for those out-of-state businesses that have no physical presence in Arkansas would be a lower rate that charged by Arkansas.

  • Who wants the federal government to get involved in sales tax?
  • Who wants to start down the road of having the federal government collect sales tax and take a share for themselves?
  • With the horrible regulatory record of the federal government, who wants the Feds to come up with the rules for a nationwide internet sales tax?
  • Who wants to have the IRS administering sales tax laws.

Nobody but the tax and spenders.

The resolution being passed by cities gives clear support for a federal internet sales tax.  Here are a few quotes from the resolution being passed:

  • The first paragraph says: “WHEREAS, the (city/town) of ____________ recognizes that legislation frequently referred to as the Marketplace and Remote Transactions Parity Act (“This Legislation”) is being considered by the United States Congress
  • The resolution resolves: “That we do hereby urge members of the Arkansas Congressional Delegation and the Arkansas Legislature to work for passage and vote in favor of legislation requiring the collection and remittance of state and local sales tax by all retailers…

Why would the Municipal League and your city support a resolution for Congress to pass a nationwide internet sales tax? Perhaps because city officials see the resolution as a way to get more tax money without having to take the blame for being the ones to pass the tax.

Even if your city has been already passed the resolution it is not too late for your city reconsider the resolution and withdraw support.

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David Ferguson is a former Director of Arkansas’ Bureau of Legislative Research, having a thirty-two-year career as an attorney for the Arkansas legislature.  After retirement from state service his primary focus has been beef cattle farming. He is also a former officer of Conduit for Action.