April 20, 2011 Alabama Senate RE: Oppose House Bill 365, Internet ...

April 20, 2011 Alabama Senate RE: Oppose House Bill 365, Internet Tax Dear Senator, I write in strong opposition to House Bill 365, which would require out-of-state retailers to notify Alabama consumers to pay taxes on products purchased online or in catalogs. HB 365 is a clear attempt to raise tax revenue in a way that violates interstate commerce law. Current jurisprudence, under the Supreme Court’s ruling in Quill v. North Dakota, requires that a business have a physical “nexus” in a state in order for the state to compel that business to comply with its sales tax regime. However, HB 365 attempts to force out-of-state companies to notify consumers of their requirement to remit “use tax” to the Department of Revenue. Not only does this legislation fly in the face of the Supreme Court’s ruling, it could bring an unnecessary and costly lawsuit to Alabama. In January, a federal District Court halted implementation of a similar law in Colorado, noting that it clearly violates the Commerce Clause and the Quill decision. In the ruling, Judge Robert Blackburn states, “the Act and the Regulations discriminate against out-of-state retailers who do not collect Colorado sales tax, because the Act and the Regulations impose on those retailers notice and reporting obligations that are not imposed on Colorado retailers.” Simply put, HB 365 would impose a significant burden on out-of-state retailers who must undertake a series of steps to notify their customers of taxes owed, a burden not imposed on in-state retailers. Not only is this a clear attempt to raise tax revenue for Alabama, but it would also invite a costly lawsuit. If HB 365 were passed, the state would likely face a similar legal challenge to Colorado and Alabama taxpayers would be forced to pick up the tab to defend the unconstitutional law. For these reasons, I urge you to oppose HB 365 and any effort to unconstitutionally require out-of-state actors to comply with Alabama’s tax laws. If you have any questions, please contact Kelly William Cobb at (202) 785-0266. Onward, Grover Norquist President, Americans for Tax Reform