NCPA - National Center for Policy Analysis

The Remote Transactions Parity Act: Burdening the Private Sector

October 2, 2015

The Remote Transactions Parity Act (RTPA) is an internet sales tax bill that would grant states the ability to collect sales and use taxes from remote sellers (except for qualifying small businesses).

The RTPA would expand the definition of nexus and would require online retailers to charge, collect and redistribute sales taxes accurately to any state where the business has, as defined by the bill, a "physical presence."

The RTPA is an unnecessary legislative overreach by states to collect comparatively small amounts of revenue at the expense of small online retailers, says research associate Stevi Knight of the National Center for Policy Analysis.

  • 45 states already have tax laws that require residents to pay sales taxes for online purchases.
  • Requiring e-commerce businesses to collect taxes for governments in which they have no say reduces states' accountability to their own residents.
  • Online retailers would be required to collect and redistribute taxes for up to 9,998 different tax jurisdictions, while local stores would only need to know the local tax laws.
  • The potential revenue from online sales taxes would not generate enough to compensate for the costs of implementation and damage to e-commerce.

Expanding the states' ability to impose taxes on citizens in other states in order to generate a small bit of revenue is not a trade-off in the best interest of either brick-and-mortar retailers or online stores. Thus, the RTPA is an unnecessary legislative overreach by states.

Possible solutions include taxing transactions at the seller's location, or a "flat-tax" solution which would institute a consumption tax.

Source: Stevi Knight. "The Remote Transactions Parity Act: Burdening the Private Sector," National Center for Policy Analysis, September 30, 2015.

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