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Christie’s Quest To Tax Internet Sales Could Eventually Reap $300 Million

Push to expand online sales tax collections pits Christie against most GOP presidential rivals

andrew sidamon-eristoff
Credit: NJTV
State Treasurer Andrew Sidamon-Eristoff.

Building on last year’s online sales tax agreement with Amazon, Gov. Chris Christie’s upcoming budget includes a plan to require out-of-state Internet retailers to collect sales tax from New Jerseyans. It's also an issue that is up for consideration by the Republican-controlled U.S. House of Representatives and one that puts Christie at odds with most of his potential rivals for the GOP presidential nomination in 2016.

Christie’s treasurer, Andrew Sidamon-Eristoff, decided to include $28 million in his budget for Fiscal Year 2015 for sales tax collections by online retailers who have no stores or outlets in New Jersey after the U.S. Supreme Court decided in December not to take up an appeal challenging the right of New York State to require out-of-state retailers to collect sales tax from its citizens.

The Supreme Court’s decision not to take up the case essentially gave states a yellow light to proceed with requiring out-of-state retailers to collect sales tax on Internet purchasers while the GOP-controlled House decides whether to join the Democratic Senate in approving the federal Marketplace Fairness Act, which would authorize the practice nationwide.

That $28 million -- combined with some $40 million in Internet sales taxes expected to be collected by Amazon and other retailers with facilities in New Jersey -- is just a fraction of the $300 million to $400 million the cash-strapped New Jersey state government could expect to collect if all New Jerseyans paid the 7 percent sales tax on taxable online purchases, according to academic studies.

Sidamon-Eristoff defended the Internet sales-tax initiative as an issue of “tax fairness” that would “level the playing field by requiring out-of-state on-line retailers to collect the same sales tax as brick-and-mortar retailers” located in New Jersey. The loss of sales to Internet retailers who don’t charge sales tax is a growing problem for big-box stores, shopping malls, and Main Street independent retailers alike, said Jon Holub, executive director of the New Jersey Retail Merchants Association and a strong proponent of Christie’s decision to follow New York State’s example.

But in the highly charged post-Tea Party politics of the Republican Party, Christie’s decision to put New Jersey on the forefront of Internet sales tax expansion and his endorsement of the federal Marketplace Fairness Act when it passed the U.S. Senate last spring puts him on the opposite side from the strongest antitax groups and most of the leading candidates for the 2016 Republican presidential nomination.

The key question for Republican leaders -- and for GOP primary voters -- is whether giving states the opportunity to collect an additional $23 billion in sales taxes on Internet purchases that were never previously paid constitutes a "tax increase," as antitax activist Grover Norquist and most GOP candidates argue, or simply enforcement of an existing requirement that 99 percent of Americans have ignored for years, as Christie and other proponents contend. Christie’s agreement with Amazon to collect sales tax on its New Jersey sales beginning July 1, 2013 -- which was part of a deal under which the online sales giant plans to build a pair of large distribution centers in New Jersey -- aroused little controversy when he announced it, but that has not been the case nationally.

Louisiana Republican Gov. Bobby Jindal was forced to abandon his landmark plan to eliminate state income and corporate taxes and replace them with a statewide tax on sales and business services last April after Louisianans objected vociferously to its reliance on a sales tax on Internet purchases projected to raise more than $800 million. Jindal, whose in-state poll ratings had plummeted, tried to recoup by publicly opposing the federal Marketplace Fairness Act as a “tax increase” when it came up in the U.S. Senate the following month. He was not alone among Republican presidential contenders in his opposition and his rhetoric:

  • Sen. Rand Paul (R-KY), who has already tangled with Christie publicly, denounced the Senate bill as an effort by governors to get the federal government to help them “soak the taxpayer” at the state level. “State politicians are already fantasizing about all the new spending programs they can create using these additional taxpayers dollars,” he asserted. “The last thing we need is more taxes for the purpose of implementing more government.”

  • Sen. Marco Rubio (R-FL) declared that “the Internet sales tax is nothing more than a money grab by tax-hungry state and local governments that are desperate for more revenue because they refuse to cut spending.”

  • And Sen. Ted Cruz (R-TX) said “more taxes would hurt (economic) growth, ” adding that it was “fundamentally unfair to ask Texas businesses to collect taxes for California Gov. Jerry Brown or for New York Mayor Bloomberg and a nanny state.”

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