PMA Sends Strong Letter to Utah Governor
Today, March 13, 2013, the PMA and its law firm, Brann and Isaacson, sent a targeted letter to Governor Herbert of Utah, outlining legal arguments around why the proposed ‘affiliate nexus tax’ legislation is unconstitutional. The letter to the governor outlines many points behind the PMA’s successful litigation against the state of Illinois, specifically about the judge who declared the law was unconstitutional. The PMA believes the legal perspective in this letter will help legislators in Utah and other states who have introduced similar bills, determine that their efforts not only violate the US Constitution, but devastate thousands of small businesses in their states. The PMA vehemently opposes these states’ “affiliate nexus tax” bills.
Performance Marketing Association Urges Utah Legislature: Say “No” to Internet Nexus Tax Bill
Estimates job and business losses in tens of millions of dollars
SALT LAKE CITY —March 13, 2013 – The Performance Marketing Association (PMA) is the latest of a broadening group opposing what they feel is one of the worst taxing measures on Utah’s Capitol Hill this year.
The PMA distributed a letter to Utah legislators, urging rejection of Senate Bill 226, known as the Internet Nexus Tax bill, a bill designed to force out-of-state retailers to collect Utah sales tax when they use Utah-based advertisers.
Instead of collecting taxes, the PMA maintains that out-of-state retailers will simply cut off Utah advertisers and send their business to other states. The PMA estimates there are over 2,300 Utah-based small online marketing businesses that will be affected.
The Senate bill, now in the Utah House, is slated to raise $500,000 in revenue for the state but threatens $200 million in business income earned annually by Utah online marketers and the $11 million in income taxes they pay to the state each year.
SB 226, appearing late in the session, has proved highly controversial, passing the Utah Senate by a single vote and raising questions about its constitutionality. The bill is modeled on various laws passed in 10 other states, aimed at overcoming a 20-year old Supreme Court decision limiting states’ taxing authority over out-of-state sellers who have no physical presence in the taxing states.
Passage of the bill also stands in the shadow of threatened court challenges; the PMA succeeded in its case against the State of Illinois, involving a very similar law, where the court ruled the law violated the Constitution and ran counter to established Supreme Court cases. Other parties and associations have challenged laws in other states.
A two-page opinion of Utah’s Office of Legislative Research and General Counsel lends support for a challenge, concluding that if the law passed and were challenged in court, there would be a high probability the Utah law would not meet constitutional standards.
The PMA informed legislators that when similar measures were passed in other states, 1,000 retailers stopped using Internet ad services in those states, with the result that one-third of the state’s advertisers went out-of-business, one-third moved out-of-state and one-third were forced into lay-offs or downsizing due to the reduced ad revenues.
The PMA has opposed these laws in other states where the effect of such bills failed to raise promised revenues and simply put people out of work. The PMA joins the Utah Technology Council, the National Taxpayers Union, NetChoice which have all weighed in against the bill, as have several large Utah-based Internet retailers.