However, conservative groups argue that forcing e-retailers to pay a sales tax when they have no physical presence in a state is unconstitutional. The US Supreme Court has said they don’t have to pay the sales taxes if they don’t operate in that state.
“Erasing the physical presence requirement allows states to reach across borders to a degree they can’t now,” says Pete Sepp, executive vice president at the Washington-based National Taxpayers Union, which believes in lower taxes and limited government. “Physical presence is a key Constitutional protection.”
The pro-sales tax organizations, however, interpret the 1992 US Supreme Court decision (Quill v. North Dakota) as still unsettled. As part of the ruling, the court said, “Congress is now free to decide whether, when, and to what extent the States may burden interstate mail-order concerns with a duty to collect use taxes.”
Since that ruling no marketplace fairness legislation has passed Congress despite the best efforts of some powerful lobbying groups allied under the umbrella of the Marketplace Fairness Coalition to change the law. Among the supporters are the AFL-CIO, the National Governors Association, the National Retail Federation, and businesses such as Wal-Mart and even Amazon.com, which is setting up distribution centers in states across the country.
But they are pushing against some conservative Republicans. Last month, 16 free-market organizations, including Grover Norquist’s group, Americans for Tax Reform, signed a letter opposing the legislation. In addition, the legislation is opposed by the NetChoice coalition, which includes companies such as AOL.com, eBay, Facebook and News Corp.