Internet Tax Reprieve

Dec 14, 2014 wsj.com: Congress spares the Web from political raids, but for less than a year.

A legislative hostage has been released—at least until next October. Buried inside Congress’s omnibus spending bill is an extension of the Internet Tax Freedom Act through the end of the 2015 fiscal year. Most gratifying for consumers is that this ban on Internet access taxes has not been bundled with a separate plan to boost sales tax collections for goods purchased online.

Senate Majority Leader Harry Reid (D., Nev.) and a bipartisan group of tax collectors had been holding the Internet Tax Freedom Act captive and preventing an extension from receiving a vote on the Senate floor. In return for allowing this popular law to live, the Senate hostage takers demanded the enactment of a separate bill called the Marketplace Fairness Act. This measure would give America’s 9,600 taxing jurisdictions new powers to reach outside their borders and force distant online sellers to collect their sales taxes, even though the Web merchants have no political representation in the taxing jurisdictions.

There would be little fairness in such a marketplace, because the bill would place burdens on Web merchants that have never been applied to brick-and-mortar stores. Such burdens include forcing an online seller that has a physical presence in a single state to answer to 50 state auditors and hundreds of tribal governments, not to mention tax collectors in all U.S. territories and possessions offshore. This bureaucratic festival has now been avoided for this year, despite a late lobbying blitz by state legislators.

To prevent future hostage-taking, Congress should enact a clean, permanent extension of the Internet Tax Freedom Act when legislators return in January.