A while back we wrote a post about potential state revenues if Congress were to pass the Market Place Fairness Act (MFA) allowing sales taxes to be collected on Internet sales made by businesses outside of Texas. The article referred to a study that projected Texas would collect $2.88 billion in new revenes should the MFA pass. I suggested the bill was DOA in the current congress, but I guess someone is worried it will pass.
Yesterday a Washington, DC free market think tank (Competitive Enterprise Institute) adjunct fellow, Jessica Melugin, penned an article published in the Austin American-Statesman warning that MFA passage would expose Texas to businesses taxation without representation from other, potentially less business-friendly states. In other words, would taxes paid to other states by Texas businesses cause more harm than the revenue Texas would collect from businesses in those other states?
The author opines "The legislation will be costly at best and lethal for jobs and small businesses at worst." She goes on to say "a recent study by tax simplification group TruST estimates implementation costs of $80,000 to $290,000 and yearly maintenance costs of $57,500 to $260,000 for midsized retailers." And I don't think that includes the taxes to be paid. More bad news: "businesses will be subject to audits by states where they have no presence."
Melugin lauds Texas for it's business friendly environment, but suggests "allowing aggressive tax-and-spend states to reach into Texas and tax its businesses largely negates the competitive advantage the state affords."
In our original article we noted that some legislators were hoping to use the additional revenue from the MFA to reduce or eliminate the franchise tax. Would the trade off be worth it? Melugin says: "The modest revenue gains of the MFA scheme simply don’t justify all the pain."
One Texas legislator, CPA and TSCPA member Rep. John Otto (R-Dayton), has expressed support for the MFA concept. Otto has pointed out that the current situation gives online retailers a competative advantage against those Texas brick and mortar business with roots in the state. Perhaps there does need to be a more level playing field, with everyone getting the sales benefits paying the same sales taxes.
Melugin's article is an opinion piece with more rhetoric than facts, but it does raise the question, is the revenue worth the hassle? If you have a digital subscripton to the Statesman you can read the full article.