State Legislator Letter: State and local officials across the country are resisting calls to allow aggressive taxation across state borders
As state legislators, we oppose the attempts to overturn constitutional precedent safeguarding Congress’s essential authority to protect interstate commerce from discriminatory regulation and taxation. As a result, commerce has grown, unfettered between the states. Such a populous and geographically expansive free trade zone is largely responsible for the abundance of wealth and opportunity—unrivaled in history—spread across our nation. Unfortunately, some state policymakers are attempting to resolve their overspending problems to look aggressively beyond their own state lines for tax revenue. This misguided bid to resolve their overspending problems utterly violates the constitutional principles that provide a proving ground for innovation, entrepreneurship and small businesses.
The U.S. Constitution was written to replace the Articles of Confederation in no small part due to the latter’s failure to prevent a spiraling interior “war” of states who could assert tax and regulatory authority outside their borders and thereby create fiefdoms for themselves. The Constitution’s Commerce Clause and subsequent jurisprudence make clear that taxing power must be limited by state borders. Businesses lacking a “substantial nexus” or link to a state through a “physical presence” such as offices, employees, or property, cannot be forced to act as tax collection agents for that state (Quill Corp v North Dakota (1992)). If the Supreme Court overturns Quill, state tax collectors would be empowered to reach across their boundaries to collect taxes from non-resident online retailers located outside of their jurisdiction. These retailers could face fines or legal challenges from taxing jurisdictions based on rules in which the online retailers have no voice.
Forcing online retailers to understand and comply with remote rates, exemptions, rules, tax holidays, or other peculiarities of 12,000 different tax jurisdictions (roughly twice as many as existed in 1992) is highly discriminatory. Contrast this with the treatment of sales in similar brick-and-mortar businesses, which only require collection of tax for the jurisdiction in which they are physically located. The compliance costs would fall particularly hard on specialty businesses and small sellers that are dependent on the internet to reach their customers. This would stunt economic dynamism, deter business activity, and unreasonable burden businesses engaging in interstate commerce.
As state legislators, we recognize the threat to growth, and to each of our states, posed by the potential unleashing of aggressive out-of-state tax collectors and auditors on businesses located elsewhere. For nearly 20 years, ALEC members have steadfastly supported the physical presence standard outlined in Quill through model policies such as the Sales and Use Tax Collection Protection Act as well as the 21st Century Commercial Nexus Act. Our constituents overwhelmingly agree (according to a Rasmussen Reports Poll) with our opposition to allowing tax enforcement agents from one state to collect taxes from hardworking individuals and businesses elsewhere. Healthy economic competition in a free market, between the 50 “laboratories of democracy,” is at the heart of the American experiment with federalism. Each year, the Rich States, Poor States publication reveals how tax policy affects state tax competition and economic outlook. Blurring—or eliminating—the limits of any individual state’s sovereignty—erodes the efficacy of this experiment.
Alaska
Representative David Eastman
Representative Cathy Tilton
California
Senator Joel Anderson
Councilman John Masson
Colorado
Representative Lori Saine
Delaware
Senator Colin Bonini
Representative Richard Collins
Illinois
Representative Brad Halbrook
Indiana
Senator Jim Buck
Representative Sean Eberhart
Representative Mike Speedy
Representative David Wolkins
Elkhart Mayor Tim Neese
Iowa
Representative Dawn Pettengill
Kentucky
Representative C. Wesley Morgan
Maine
Senator Andre Cushing
Representative Rich Cebra
Representative Matthew Harrington
Representative Trey Stewart
Representative Nathan Wadsworth
Representative Tom Winsor
Michigan
Representative Daire Rendon
Mississippi
Representative Gary Chism
Representative Dan Eubanks
Representative Steve Hopkins
Missouri
Representative Kurt Bahr
Representative Bruce DeGroot
Representative Justin Hill
Montana
Senator Dee Brown
Senator David Howard
Senator Doug Kary
Senator Fred Thomas
Senator Roger Webb
Representative Tom Burnett
Representative Barry Usher
Nevada
Senator Don Gustavson
New Hampshire
Senator Gary Daniels
Representative Marc Abear
Representative Glenn Cordelli
Representative Jess Edwards
Representative Richard Gordon
Representative Peter Hansen
Representative Werner Horn
Representative Raymond Howard Jr.
Representative John Lewicke
Representative Norman Major
Representative Sean Morrison
Representative John O’Day
Representative Jordan Ulery
Representative Michael Vose
Representative Ken Weyler
New Jersey
Senator Michael Doherty
North Carolina
Senator Joyce Krawiec
Representative Mike Clampitt
Representative George Cleveland
Representative Dennis Riddell
North Dakota
Representative Daniel Johnston
Representative Matthew Ruby
Ohio
Representative Wes Retherford
Representative Andrew Thompson
Oklahoma
Representative Jason Murphey
Oregon
Senator Dennis Linthicum
Representative Gene Whisnant
Pennsylvania
Representative Seth Grove
South Carolina
Representative Alan Clemmons
Representative Garry Smith
South Dakota
Representative Taffy Howard
Tennessee
Representative Jay Reedy
Texas
Representative Tom Craddick
Representative Phil King
Representative Rick Miller
Representative Ron Simmons
Judge Keith Self
Utah
Representative Kim Coleman
Virginia
Councilman Jon Russell
West Virginia
Delegate Gary Howell
Wisconsin
Representative Mike Kuglitsch