These people in this picture are the people that are about to have a huge impact on not only the entire Online Marketing industry, but also small and mid sized business and even large business across the country.
Today I walked in to the Rayburn Building Independence Avenue Exit on Capital Hill in Washington DC. It really did look and feel just like Elle Woods in the Movie Legally Blond, and the way we were all asked to be quiet definitely felt the same.
When looking over the Panel members before the hearing started, I noticed not one of them was from the Online industry or in my opinion had our best interests at mind. I actually wasn’t even sure they would know about the things we are concerned about, about the hardships small to large companies would have with trying to enforce and collect taxes in over 6,000 jursidictions, but to my surprise, they were extremely well educated, very well spoken and they all actually did voice their own opinions on Nexus and Taxes and covered virutally all bases.
Anyways, instead of me just voicing my opinions in this post, I’m going to go over the notes I took during the hearing and although I am not a lawyer, I cannot give legal advice and I may have missed some things, this is what I got from it and just my personal opinions and understandings as well. If you need or want a legal opinion, you should contact a licensed attorney and a Tax Lawyer.
Here is my recap of the Streamlines Sales Tax Meeting from Congress.
11:00 am. The meeting is supposed to start. Unfortunately no one had shown up from congress at this point and the people there were joking about chickens and goats and only one person was talking about taxes and nexus to the person next to him, even though she didn’t seem interested. The one thing I did notice was that the DMA, CES, Truckers Union and other large organizations had submitted papers, opinions and facts sheets on why this needs to be a Federal Issue and not up to the states. They also submitted on why State taxes were unfair and unlawful.
11:45 am. Chairman Cohen shows up and gets the meeting started.
Now, I was kind of insulted by the way he treated this issue. Not only did he make it a joke and not take it seriously, (then again it isn’t his industry or his job on the line) but he proved why he got elected to Congress. He is extremely personable and can make a joke easily. He definitely loves politics and putting people down. Fortunately for us though, he seemed to favor the side of the Taxes being unconstitutional and that it needs to be streamlined or be taken away so that everyone can compete. The main focus I think ended up being that we don’t want to prevent or stop interstate commerce and tax laws will do just that.
The thing that really bugged me and made me feel that Chairman Cohen won’t take this seriously is that he kept saying this is text book, this is classic, we have heard it before, etc… Anyways, overall it seemed that Chairman Cohen sides with reason in that trying to implement the taxes and collection is going to be almost impossible, however he also made a joke when asking about 30 days or roughly 6 business weeks would be three years in the Senate so I don’t actually see him trying to resolve or protect our industries any time soon.
One thing interesting about this meeting was the split between Democrats and Republicans. The entire Republican Party in attendance declined to have an opening statement while most of the Democrats spoke up.
Now, Congresswoman Lofgen (D) gave a nice speech on what she expected to hear or wanted the witnesses to talk about. She made it sound that although she understands and feels for the Local and State Governments, she is siding with business as she also knows how ridiculous and hard it will be to try and collect taxes and how much of a burden it will be. She is on the side of business and Online Marketing from my understanding.
Congressman Johnson (D) on the otherhand kept on switching sides. He in my opinion will be siding with Local and State Government and not be siding with small business and Online Marketing. We need to work on him and get him on board. Even with a flat tax he could be happy and we can all keep our jobs.
Now the witnesses started speaking.
Professor Helerstein was a very intelligent person. It started out sounding like he was for the taxing, but when he got through everything he made some amazing points as to how this was completely unfair and would cause more burden than it is worth doing business across state lines.
He gave a very strong definition of Nexus which I wasn’t able to write down fast enough and also defined it as economic vs. actually having a physical presence for income taxes as well as ecommerce. From what I was able to gather, he also feels that Congress has the ability and the power to actually step in and stop the States from being able to enforce these taxes and tax laws which will be bad for businesses and almost impossible to implement. What I really enjoyed was his sports team examples as well.
When they were discussing income taxes and mobile workforces they asked, what about a sports team that flys to one State to play a game. Do you tax them, do you tax the entire time they were there, where do you draw the line?
The big issue he talked about and used Amazon as an example is the interstate commerce and how the taxes can have a seriously negative impact on interstate commerce. He also brought up examples of snow birds or people with homes in more than one state and live in multiple states. He then compared large businesses to small businesses and said that small businesses cannot afford the burden of Nexus and the Tax Laws and the Nexus with business travelers and Income Tax and Use Laws.
Mr. Crosby was up next.
Crosby was the one that said that Congress needs to act now. He is 100% on our side from what I could gather. He also admitted that he has not paid his use taxes and business traveling taxes as well as other taxes because the burden would be too great. He also explained that if they tried to come after him, because he pays 8.5% income taxes to his home state of Maine, he would also be in the clear and be able to get credits from Maine for the other states, but at the same time it would be nearly impossible for him to be able to track down and pay on all taxes. From what I could understand, he is also opposed to the Local and State taxes and thinks that they are unconstitutional.
Then, more Congress people finally showed up like Ms. Chu.
Now, they moved onto the last witness who was Commissioner Johnson. Commissioner Johnson is the enemy of Business and Friend to the State.
He clearly is 100% opposed to business and the people and all for the taxes. He argued out left and right why we need to have the Neus Laws and Taxes and avoided the burdens that it will cause on small and even large sized businesses. He also completely ignored the people who would have to pay the taxes. There were even some jokes that started to get made from the Senators like “It’s always easier to tax the people when they aren’t in your jurisdiction”. I think one of the fatal flaws of Commissioner Johnson from Utah was that he talked about this little local bookshop that his Grandmother went to (And this guy is definitely a senior citizen so this was a very long time ago), and that his other favorite shop is Amazon who also knows him a lot better.
He talked about the emails he gets that shows him all of the books he might like that he ends up buying and then brought up the point that why should that small book store that his Grandma had used when he was a little kid have to pay taxes when Amazon can come in and sell to him and not have to pay them.
What I wanted to say was two things. 1. Because Amazon will now drop hundreds if not thousands of local businesses to save that one. 2. Why doesn’t that local bookstore bring themselves online. With the long life and history they have, they could easily build an online cult following and start a history/commerce site. Congressman Jordan (R) did speak up on this and did ask about what is stopping them from going online and competing in a National Marketplace. That pretty much got Commissioner Johnson to change topics fast.
Commissioner Johnson of Utahs argument relied solely on defining nexus by having an economic presence and not a physical one. That is a very scary thought and also a very flawed one.
Congressman Watt (D) got his turn to speak.
Unfortunately the Congressman was not educated on Tax issues and someone really needs to reach out to him. At least he, in my opinion, admitted to it and genuinely wanted to learn more about it so he can make an educated decision. NC residents, get in gear and teach him everything you can. He is leaning towards our side. He also called Commissioner Johson of Utah out on the fact that his organization was given the magic number of 10 states to sign up for a tax law and then they need to act.
They recently signed up WI for a streamlined tax making it 21 states which also brought his argument out to the fact that they are missing their opportunity to hurt this Country and they are also loosing their reputation as a group that could do something. Thank you Congressman Watt for calling him out on this.
Watt seems opposed to the Local and State taxes but is about 50/50 on the streamlined taxes.
Finally after all of this, Congressman King (R) showed up and missed practically the entire hearing. That was very insulting to me and I hope all of his people and those of us who live in his State of Iowa.
One last thing I would like to bring up was a case that one of the Congresspeople brought up. A local food processing company in VA was shipping their products up to New England. When the truck was going through NJ, not dropping food off there, NJ “hijakced” their truck and made them wire money to release the truck based on taxes. Apparently shipping food through NJ may count as Income Tax or Use tax or Business travel and companies may have to pay the State if their trucks drive through. This would devastate Philadelphia companies shipping to NYC, not to mention crush NJ if people start altering their shipping routes.
Anyways, there is a huge fight ahead to get an easy to work with flat tax rate for online or to eliminate it altogether. I think the interstate commerce argument is going to be one of our best arguements, but we also need everyone to get the word out. It doesn’t just affect Affiliates and Merchants, it effects consumers and all businesses.
It is time to start fighting these taxes and then worry about all the bullcrap later. Lets get the Federal stuff going and at the same time keep the States giving us our right to have our own businesses. VA is coming up in a few weeks and even though I don’t live there I am still trying to fight it. We need to start coming together and the different groups need to start sending materials to these meetings as well. If you want to join the fight, write me at adamr (at) adamriemer (dot) me and I’ll share some resources with you as to how we are trying to fight these taxes.
4 thoughts on “Streamlined Sales Tax Judiciary Committee Meeting”
Awesome recap, Adam. Thank you!
And thank you for showing up!
No problem. Everyone needs to fight and be educated on their Local and State taxes. If you live in DC, you have to fight it on a National level because guess what, our Local Government is your National Government and we don’t really count as a State but a district. The National Government is the battle that the DC Affiliates needs to fight.
Thank you Adam for being our eyes and ears in the Capital and sharing these details.
I want to encourage everyone reading this to raise visibility on these issues. They will seriously impact every online business – and as you can see from the New Jersey trucking example – EVERY business online or off.
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I have a simple solution we can suggest. Have businesses continue to pay taxes in the state where they have a physical presence. Then have them pay a percentage of all other sales directly to their favorite charity.
That levels the playing field for businesses on and off the Internet, would eliminate the huge waste of time and money that would be required to pay track taxes for each state, and by increasing what is done privately we reduce the size of government.
If you (Adam or anyone reading this) like my idea feel free to claim it as your own and run with it. We made a huge mistake relying on government for so much and this one solution could go a long way in putting responsibilities back where they belong: with the individuals most passionate about what they are doing.
Thanks Growmap.com. I agree, we need to start getting our voices heard. The National Government is concerned with Interstate Commerce. From this meeting, it sounded like they can override the unfair and in my opinion unconstitutional State and Local Tax laws being passed and we need them to either step in and make it easy for all business to be able to comply, not to mention protect Affiliates and smaller online stores from going under because of the burden of these taxes, or put an end to the online sales taxes in general.