February15,2017
AnOpenLettertotheIndianaHouseofRepresentatives:
RejectS.B.545’sUnconstitutionalTaxGrab
DearIndianaRepresentative,
Onbehalfofthemillionsofmembersoftheundersignedorganizations,including
thousandsofIndianaresidentsandtaxpayers,wewriteinstrongoppositiontoS.B.545,
whichwouldrequireonlinebusinesseslocatedoutsideIndianatoremitsalestaxesto
thestate.Thislegislationisbothunconstitutionalandunwiseandshouldberejected.
Thisbillandsimilarapproachestointerstatesalestaxesholdanignominious
distinction:theyaretheonlysucheffortsinrecentmemorytobeintentionallydrafted
soastobeunconstitutionalanddrawalawsuit.ByempoweringIndianatocollecttaxes
frombusinesseswithnophysicalpresencewithinyourborders,therulewould
immediatelydrawIndianaintoapotentiallyexpensiveandbittercycleoflitigationthat
isduplicativeofsimilarcasesinotherstates.It’sacycleunlikelytoyieldapositive
result,sincedecades-oldSupremeCourtprecedentmakesclearthatstatetaxpowers
stopattheborder’sedge.
Furthermore,asystemofsalestaxenforcementunboundedbyanytangibleconnection
likeaphysicalpresencewouldimposesignificantcompliancecostsonweb-enabled
businesses.Thisburdenwouldfallparticularlyhardonspecialtybusinessesandsmall
sellersthataredependentontheinternettoreachtheircustomers.Theywouldbe
forcedtokeeptrackofall10,000taxingjurisdictionsacrossthecountry,eachwithits
ownrates,rulesandregulations,whilesalesinsimilarbrick-and-mortarbusinessesonly
requirecollectionoftaxforthesinglejurisdictioninwhichthey’relocated.
TheU.S.ConstitutionwaswrittentoreplacetheArticlesofConfederationinnosmall
partduetothelatter’sfailuretopreventaspiralinginterior“war”ofstateswhocould
asserttaxandregulatoryauthorityoutsidetheirborders.WhiletheConstitution’s
CommerceClauseandsubsequentjurisprudencemakeclearthattaxingpowermustbe
limitedbystateborders,thisbillseekstowipethoselimitsaway.Thatwouldbe
dangerousandweurgethatyouandyourfellowlegislatorsacttostopit.
Sincerely,
Settingasidethebills’obviousunconstitutionality,itisdecidedlyunwiseforIndiana.By
contributingtotheerosionofbordersaseffectivelimitsonstatetaxpower,itwill
encouragepoorly-governed,tax-heavystateslikeCalifornia,NewYork,andIllinoisto
unleashtheiraggressivetaxcollectorsonIndianabusinesses.Yourownconstituents
couldbesubjecttoauditandenforcementactionsinstatesallacrossthecountryin
whichtheyhavenophysicalpresence.
AndrewMoylan,RStreetInstitute
NormSingleton,CampaignforLiberty
JeffreyL.Mazzella,CenterforIndividualFreedom
JessicanMelugin,CompetitiveEnterpriseInstitute
WayneBrough,FreedomWorks
LisaB.Nelson,TheJeffersonianProject
PeteSepp,NationalTaxpayersUnion
DavidWilliams,TaxpayersProtectionAlliance
JudsonPhillips,TeaPartyNation