Minnesota legislative tax proposals would stifle internet commerce

Minnesota started 2017 with a significant commitment to expanding the state's economy through innovation. The state announced a $34 million promise to expand broadband internet service across the state. This decision will give 16,000 households and 2,200 businesses high-speed internet access that will boost economic growth through everything from online education to e-commerce.

Ironically, Minnesota policymakers are simultaneously reversing course on this commitment by considering two bills — HF4 and SF2255 — that would stifle online commerce through heavy-handed taxation. Online sellers drive small-business growth throughout the country. This legislation puts the onus on the online marketplaces operating in Minnesota to collect and remit sales taxes. There are real constitutional questions associated with this concept that will cost Minnesota taxpayers a great deal of money to litigate in the long term. And in the immediate term, online marketplaces will look to other states for their investment and job creation.

This proposal would completely disrupt business across Minnesota's economy, creating new requirements for companies collecting and remitting taxes on the sales of products and services even when they are not the seller. The plan, in brief, would force "marketplace providers" to collect sales tax for sellers in their marketplaces — an unreasonable burden, to say the least.

Would it make sense for the owners of a shopping mall to be required to collect and remit sales tax for the food court or any other store in the mall? Would you support requiring telephone companies to collect and remit use taxes on purchases made over the phone? Of course not.

Yet, the new proposal calls for exactly that. As the examples above demonstrate, if the bill were to pass as written, the inevitable effect would be a discriminatory set of regulations that would only apply to internet companies.

Undermining the internet — which contributes significantly to Minnesota's economy — only weakens the state economy and makes it harder for businesses to grow and thrive.

Minnesota's residents recognize the importance of the internet, and 79 percent of Minnesotans oppose this proposed bill. It is both unfortunate and ironic that the very growth that makes the internet such a powerful force for Minnesota's economic advancement is simultaneously the factor making it an attractive target for lawmakers looking for new methods of tax collection. Responsible policymaking must recognize the critical balance at play here and avoid creating an atmosphere that undermines the internet economy's ability to create jobs and opportunity for Minnesota's residents.

Minnesota is poised to capitalize on internet-enabled business, but only if its public policies support the internet economy.

Policymakers, regulators and business leaders must look to boost Minnesota's economic growth. The internet sector is an ever-growing area of opportunity unless legislators create barriers to business and anticompetitive regulations that prevent future growth. The federal government made the decision long ago to encourage continued innovation and foster a vibrant digital economy, and these policies have allowed the internet to develop into the economic engine it is today. Members of the internet community encourage leaders in St. Paul and across the state to continue this tradition.

Dustin Brighton is vice president of state government affairs at Internet Association, which represents America's leading internet companies.