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March 11, 2004 An Open Letter to the
Senate Budget and Taxation Committee: Dear Senator: oooooOn behalf of the more than 7,500 members of the National Taxpayers Union (NTU) in Maryland, I write to urge you to vote against legislation now before your committee, HB 694, which would enter Maryland into the so-called Streamlined Sales Tax Project (SSTP) in the event that Congress approves the necessary legislation. Although many public officials have argued that states will reap a windfall by collecting online sales taxes that now go uncollected, the creation of such a cartel will undermine more than 200 years of federalism and competition among the states, thus hurting economic growth, nationally and in Maryland. oooooThe Supreme Court has consistently held that sellers of products through the mail and over the Internet should not be forced to collect and remit taxes to the 7,600+ taxing authorities across the U.S. unless they have a "significant presence" in a given state. Even under "simplified" rules, forcing Internet companies (especially small start-ups) to collect taxes for thousands of jurisdictions across the country could prove burdensome, thereby driving them out of business and stifling economic growth. oooooKansas is an example of just how complex and burdensome a "simplified" sales tax system can be. The state's streamlined sales tax collection law - in effect since July of 2003 - has been an unmitigated disaster for Kansas's retail businesses, counties, and cities, which will now lose out on revenues once brought in by urban and suburban shopping centers. In fact, several business groups immediately called for and received a six-month moratorium on the implementation of the plan. Upon expiration of the moratorium, Governor Sebelius declared a "period of relaxed enforcement" of the law because so many businesses were struggling to implement the complicated software essential for destination-based tax collection. An effort to overturn the "streamlined" tax collection system recently passed the Kansas House of Representatives. oooooSince Internet sales comprise less than two percent of all sales, and many of these transactions are already taxed, Maryland's new taxing power - if Congress approves - is unlikely to solve the state's budget problem anyway. Maryland's entry into the SSTP will, however, harm the very small businesses that are the backbone of the state's economy. For all the forgoing reasons NTU and its members urge you to oppose HB 694. Sincerely, 108
North Alfred Street
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Alexandria, Virginia 22314 