The Fix Is in on Internet Sales Tax

| November 30 2013

Obama’s SBA spent $80,000 in taxpayer money on study to promote Internet sales tax

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There’s wasteful spending and then there’s wasteful spending, Chicago-style. File this under the latter. To translate the bureaucrat-ese at the link for you, this is an award notice for an $80,000 contract from the Small Business Administration (SBA) to study “Internet Sales Taxation and Small Online Retailers.” In service of the PR campaign for President Obama’s and Senator Dick Durbin’s favorite Internet sales tax law, the SBA decided to fork over $80,000 of taxpayer money to…(drumroll please)…the very people who have been writing studies in favor of the Marketplace Fairness Act (MFA)! What a coincidence!

And by coincidence, I mean unconscionable outrage. In a recent R Street Institute-National Taxpayers Union commissioned poll, 57 percent of Americans said that they oppose the kind of Internet sales tax scheme contained in the Marketplace Fairness Act. Knowing that it’s tough to overcome public opinion when it is uniformly arrayed against them, the retail lobby that seeks passage of MFA to handicap online competitors has spent millions to propagandize in favor of the bill on Capitol Hill where big money can help muddy the waters. It now appears that they have some taxpayer-funded allies in Obama’s Small Business Administration.

The study itself is relatively unremarkable since it simply rehashes matters that have been discussed ad nauseam in the world of people who pay close attention to these issues. In fact, the most important passage essentially concedes that having a higher small seller exception in the bill “does not add measurably to the covered share of total online retail.” In other words, protecting a larger number of businesses from the onerous compliance obligations of MFA wouldn’t appreciably reduce revenues. In a shocking oversight, the study includes only one passing mention and exactly zero analysis of the tax audit and demand letter threat faced by businesses that sell remotely. And of course, it never grapples with the very real constitutional questions surrounding the bill, including whether or not it’s a violation of the due process clause regardless of the existence or dollar amount of a small seller exception.

What’s interesting about it isn’t the content, then, but the campaign to promote it and to use it as support for passage of the Marketplace Fairness Act. A little birdy forwarded me an email from an SBA staffer addressed to a laundry list of MFA supporters, apparently looking to give them ammo for their efforts to get the bill passed and even going so far as to include sample Tweets to help them promote the study. And for the record, it’s not like SBA was just sending this out to everyone who works on this issue. I’ve been involved in trying to protect businesses small and large from the negative impacts of such Internet sales tax laws for years, much to my chagrin, but I sure as heck didn’t receive an email notifying me about the study’s release from the office of SBA’s Chief Counsel for Advocacy like MFA supporters did. Why is that, exactly?

Big business lobbyists have already poured millions of dollars into pushing an Internet sales tax bill to knee-cap their competition. They sure didn’t need another $80,000 swiped from taxpayers’ wallets to help make their case.