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1 Joseph Henchman, Testimony before Maryland Legislature on the Streamlined Sales Tax Project 1 (2009)

handle is hein.taxfoundation/taxfaajd0001 and id is 1 raw text is: TAX 1 FOUNDTION Written Testimony of Joseph D. Henchman Tax Counsel & Director of State Projects, Tax Foundation Committee on Ways and Means February 18, 2009 Regarding H.B. 337 My name is Joseph Henchman, and I am currently Tax Counsel and Director of State Projects at the Tax Foundation, a non-partisan, non-profit research institution founded in 1937 to analyze tax issues and raise economic awareness among taxpayers, lawmakers, and the media. We track tax-related issues at all levels of government, and have followed the Streamlined Sales Tax Project (SSTP) effort closely. I would also note that I am a proud member of the Maryland Bar. We appreciate the opportunity to submit this written testimony regarding H.B. 337 to the Ways and Means Committee. The Tax Foundation takes no position on the bill, but is eager to provide information about the subject matter. Maryland and other states considering involvement with the Streamlined Sales Tax Project (SSTP) should be fully informed about both the positives and negatives of the project. The effort has its merits, but it also neither a source of free money nor non-controversial. The written testimony which follows is drawn from two papers I have published on the subject. The first, Why the Quill Physical Presence Rule Shouldn't Go the Way of Personal Jurisdiction, was published in the State Tax Notes trade publication in November 2007. The second, Nearly 8,000 Sales Taxes and 2 Fur Taxes: Reasons Why the Streamlined Sales Tax Project Shouldn't Be Quick to Declare Victory, was produced in-house at the Tax Foundation in July 2008. I would also recommend a paper produced by the Council on State Taxation, 'Old Economy' Tax Systems on a 'New Economy' Stage: The Continuing Vitality of the 'Physical Presence' Nexus Requirement, published in February 2003, which reviews the mixed success of the SSTP at that time. The Tax Foundation would be happy to provide copies of these materials. In 1992, in Quill Corp. v. North Dakota, the U.S. Supreme Court reaffirmed that the power of states to impose taxes on interstate commerce is limited by their geographic border. Although some academics resent this physical presence rule, it remains the law of the land and is essential to prevent revenue officials from wreaking havoc on national markets by reaching beyond their borders for tax revenues. Since no working alternative to the physical presence rule has been developed, abandoning it would result in states harming themselves by harming the whole. Written Testimony of the Tax Foundation 1

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