U.S. Sen. Jon Tester, D-Mont., really hates online sales taxes.
I mean really. His April news release opposing a federal law on internet sales reinforced a similar news release in February.
“Montana doesn’t have a sales tax for a reason,” Tester said in the release. “This law would supersede the rights of our state and the will of our people by forcing Montana’s small businesses to collect a tax we don’t support to benefit states we don’t live in.”
From his perspective, this is a no-brainer. Montana businesses aren’t crying out for a chance to do sales tax paperwork for other states. Montana consumers aren’t begging for a chance to pay sales taxes online. And Montana has no sales tax, so it would get nothing from the law.
The politics are easy, but the issue isn’t. Rejecting online sales taxes might be good for Montana, but is it good for America?
At stake is the Marketplace Fairness Act, which passed the Senate, 69-27, in 2013 with both Tester and former U.S. Sen. Max Baucus, also a Democrat, against it. Democrats supported the bill, 46-5.
The vote split Republicans. Twenty-one Republicans favored the bill, and 22 opposed it. Two independents also favored it.
A similar bill in the House was referred to a subcommittee, where it languished. Sen. Mike Enzi, R-Wyo., introduced the bill again in the Senate last year, where it is before the Judiciary Committee. Sen. Lamar Alexander, R-Tenn., said in February that the bill has a good chance of passing both houses this year, although it has prominent opponents.
Among them is Montana Attorney General Tim Fox, a Republican. In a letter he and two other state attorneys general wrote to House members, they claimed the bill violates the U.S. Constitution’s Due Process Clause.
Also against the bill is U.S. Sen. Steve Daines, who joined three other senators last year in a letter to Senate Majority Leader Mitch McConnell. The letter called the act “misguided and destructive.”
According to a summary on Wikipedia, the bill splits conservatives across the board. Supporters included William F. Buckley, the conservative icon who has since died; U.S. Sen. Rand Paul, a Republican with libertarian leanings; Arthur Laffer, the economist who invented the notorious Laffer Curve; Americans for Limited Government; and New Jersey Gov. Chris Christie.
Opponents include the Heritage Foundation, a conservative think tank; the National Taxpayers Union, which did not become a union because it likes taxes; the Direct Marketing Association, which called the act an unfunded mandate; and the Agricultural Retailers Association, which is concerned about audits and bookkeeping costs.
So why would an act calling for marketplace fairness split conservatives so neatly? Because it pits a couple of basic conservative principles against each other.
Let’s be clear: Passing the bill does not create any new taxes. It merely requires businesses in one state to collect sales taxes owed to other states. Under a 1992 U.S. Supreme Court decision, retailers are now required to collect sales taxes for other states only if they have a physical presence in that state.
So, let’s say, if a Montana company opened a store in Wyoming, it would have to collect Wyoming sales taxes. But if it stays in Montana, it can sell online to Wyoming customers tax free.
Technically, that doesn’t let Wyoming consumers off the hook. They are still legally required to pay Wyoming’s sales tax on items they buy online elsewhere. But they often don’t.
Since there are some 9,600 taxing jurisdictions in the United States, opponents of the bill argue that it will impose an unreasonable bookkeeping requirement. The bill attempts to deal with that problem in a couple of ways: It requires states to adopt certain tax simplification proposals before they qualify under the act; and it exempts businesses with less than $1 million in annual sales.
In addition, the very technology that made online sales possible has drastically reduced the bookkeeping burden. Even my meager computer skills, which I learned on an abacus, are advanced enough to create a spreadsheet that would handle the problem.
And I will make the federal government this special one-time offer: I will create complete turnkey sales tax software for the government to freely distribute to businesses all over the country. All I ask for payment is whatever Donald Trump paid in taxes last year.
Even a simplified bill puts Republicans in a quandary because, on one hand, it sounds like taxes, which give them the heebie-jeebies. On the other hand, conservatives feel naturally protective toward brick-and-mortar stores.
So do I. For a couple of centuries, brick-and-mortar stores have provided jobs, paid property taxes, served customers and sponsored everything from Little League baseball teams to bake sales. They deserve a level playing field. Do we really want a tax system that punishes Montana companies for opening stores in Wyoming?
Since the federal government has failed to act, states are taking matters into their own hands. They are clamping down on their own taxpayers to pay sales taxes, and they are passing laws that test, and may overthrow, that 1992 Supreme Court decision. That’s why Amazon.com, which already is collecting sales taxes in 24 states, is backing the Marketplace Fairness Act.
Republicans in this wild election season are learning the hard way that good politics doesn’t always amount to what’s good for the country. Tester needs a lesson about that, too.