The North Dakota House is considering a bill tomorrow – SB 2298 – that would ramp up collection enforcement of the existing sales tax on all online purchases. This means that the state will begin to unconstitutionally collect more taxes from hardworking North Dakotans, driving up the cost of goods and services and making North Dakota a less competitive place to do business.
State tax policy (like that proposed in SB 2298) that serves retaliatory or protectionist ends clearly violates the Constitution’s commerce clause. The U.S. Supreme Court has consistently ruled that state governments cannot force companies to collect and remit sales taxes unless they have a physical presence within the state’s borders.
But the authors of the bill already know this – in fact, they acknowledged as much within the original text of the bill itself (which has since been amended).
This constitutional limitation works to the advantage of businesses and consumers in North Dakota. Without it, citizens of our state would be subject to whims of legislatures in states with values far different than our own. Do we really want to open the door to giving California lawmakers control over North Dakota policy?
If it’s revenue they seek, they should look elsewhere. Based on the experiences of other states, North Dakota is unlikely to receive any net benefit from increased collection enforcement actions. Colorado, for example, prior to implementation of a similar policy, estimated collection of hardly even enough new tax dollars to cover the additional government employees needed to enforce it.
The fiscal note confirms this, saying SB 2298 “may result in additional sales and use taxes being remitted by remote sellers… if there is no legal challenge to the law.” To what extent is not clear: “possible additional revenue that may result… cannot be computed.” In other words, they don’t know what it will cost to implement and they don’t know how much revenue it would bring in. Not exactly the fiscal certainty that North Dakota families and businesses are looking for.
In a time of tightening budgets, politicians should be looking for ways to live within their means, not seeking to unconstitutionally collect more revenue from North Dakotans.
Finally, the proposals in SB 2298 are currently being re-litigated by at least two other states, South Dakota and Alabama. It would be a waste of taxpayer dollars to replicate a legal challenge that other states have already brought forward in the courts, or prepare to implement a program today that may well be ruled unconstitutional (again) tomorrow.
Our economy flourishes when entrepreneurs can start and expand their businesses, but flounders when the government raises taxes, increases red tape, and tries to pick winners and losers – which is exactly what SB 2298 does.
If enacted, this legislation would create a bad precedent for overly complex tax policy in North Dakota and waste taxpayer money. That’s why we’re taking action to oppose it. Sign our petition and tell lawmakers you oppose an internet sales tax.