The legal battle over online taxes actually began in 1967 with National Bellas Hess, a retail mail order business whose main physical place of business was Missouri where the plant would receive mail orders from its customers and ship off their consumer products to their clients. The State of Illinois – home to more than a few heavy handed local governments over the years – decided to slap a user tax on all state clients of National Bellas and a court battle ensued. The Supreme Court in 1967 handed the State of Illinois a defeat stating, ” The Commerce Clause prohibits a State from imposing the duty of use tax collection and payment upon a seller whose only connection with customers in the State is by common carrier or mail.” Quill corp v North Dakota in 1992 reaffirmed the precedent set in 1967: the only way a company would have to pay state taxes would be for it to have a nexus or physical presence within the state of residence of the consumer.

That was just a year before the world wide web exploded in case anyone needs reminding. For the US Senate, SCOTUS decisions are not good enough, so last year they passed the Marketplace Fairness Act of 2013 which gets right down to business in section 2: Authorization to require collection of sales and use taxes. It authorizes state governments to collect and remit sales taxes on “remote sales sourced to that Member State.” And now the wise and honorable members of the Senate have found a way to take another step towards assuring interet taxes prosper far and wide across the land. They plan to link an internet sales tax provision to a bill prohibiting the collection of internet access taxes. In other words, if Congress, and especially the House, want to continue upholding the ban on internet access taxes then they will have to bite the bullet on online sales taxes. All this in a lame duck session, seeing the current ban on access charges to the internet expires in December. Brick and mortar retailers are all for it. Both Dems and Republican members of Congress seem to be for it. One wonders if the Senate tactic succeeds, what further measures might be proposed for the good of the internet as well as for the good of local and state coffers. One can use the challenges of the internet to encourage simplifying and unifying state tax codes to encourage all business, online or offline. Or one can revert to blunt attempts to turn back the clock in the name of government tax grabs. It’s clear which way the US Senate has chosen, just like the State of Illinois in 1967. Do we need a new proposition-13 style revolt? It may be the only response possible from those who wish to move forward and not backwards.

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