GOP senator dislikes Branstad Internet sales tax stance

DES MOINES – Iowa Republican Gov. Terry Branstad is getting push back from a member of his own party for supporting federal legislation to bolster state efforts to collect sales taxes on Internet sales.

Branstad recently wrote a letter to Iowa's congressional delegation, urging them to support so-called Marketplace Fairness legislation that already has passed the U.S. Senate that would overturn a court case which has impeded states from fully collecting sales taxes owed on online retail sales.

The Iowa governor told reporters this week that Internet-based sales have “dramatically increased” to the point where the tax inequity is causing a competitive disadvantage for bricks-and-mortar Main Street businesses that add the required sales tax to their prices while online outlets do not.

Branstad also pledged that he would earmark any revenue generated by federal legislation that increases tax collection compliance on Internet sales to be returned to Iowans via lower taxes. State officials estimate the federal law change could boost sales and use tax receipts by up to $18 million a year.

However, state Sen. Kent Sorenson, R-Milo, wrote Branstad this week criticizing the federal proposal as “economy-debilitating and perhaps unconstitutional legislation” and urging the GOP governor to rescind his support for what amounts to a “tax hike” on Internet-based sales.

“This bill is anything but an act of fairness and should be soundly rejected by Iowa's congressional delegation,” Sorenson stated in his letter to Branstad.

“You stated that this would erase the disparity between brick and mortar retailers versus online retailers,” Sorenson wrote, “but in reality it would be a national internet sales tax that would create a nightmare for small to medium sized online business owners and would obliterate the little man in favor of mega corporations.”

Sorenson said the proposed federal law change would not create jobs, “other than for tax compliance professionals,” but would create “devastating” ripple effects for small businesses that would be forced to devote more time and resources to tax law compliance rather than production and sales.

“What it would do is discourage small business owners from taking the risks necessary to create more jobs and, just like Obamacare, it would punish small businesses rather than reward them for being successful,” the GOP state senator added.

In response to Sorenson's letter, Branstad spokesman Tim Albrecht noted the governor recently signed the largest tax cut in state history and believes Main Street businesses should have a level playing field with e-commerce competitors. “We will not rescind a letter that calls for increased fairness for Iowa businesses,” he added.

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