Interstate Commerce Sales Tax

By Phillip G. Kayser · 4/18/2018

Government theft from citizens takes many forms. One of the forms that even so-called "conservatives" often justify is the sales tax. They claim it is a much more fair form of taxation than property tax or income tax. But I don't consider any form of theft to be fair. Trump recently tweeted, "States and Cities throughout our Country are being cheated and treated so badly by online retailers. Very unfair to traditional tax paying stores." Many "conservatives" are getting on the inter-state-commerce-sales-tax bandwagon. Our own state has pushed Bill 44, "The Remote Seller Sales Tax Collection Act." But collection of interstate sales tax is both unbiblical and unconstitutional.

The Biblical case against sales tax

My Biblical case against interstate sales tax collection is rather simple - the Bible has nowhere authorized such a tax. You might ask, "What difference does that make?" It makes a huge difference. It spells the difference between submission to God or rebellion against God. If the civil magistrate is "God's servant" (Rom. 13:4), then a servant should look to his Master for guidance on what he should do. Civil governments must learn to justify every action they take from the Bible. As Jesus said to the Roman governor, Pilate, "You could have no authority (ἐξουσίαν) at all over (κατά with the genitive) Me unless it had been given you from above." (John 19:11). Note the absolute qualifier "at all." Unless God gives the authority, the state does not have that authority. The Regulative Principle of Government that the Puritans held to states that the individual and family retains all authority, ministry, powers, and responsibilities that are not explicitly given to either church or state by the Bible. This makes for a rather limited church government and civil government. Romans 13:1 repeats this concept in its description of the ideal government that all governments should aspire to. It says literally "For there is no authority unless from God" (v. 1). States must only enforce "the ordinance of God" (v. 2), must only be a terror to evil (v. 3), must act as "God's servant" (v. 4), and therefore the taxes that are "due" (vv. 6-7) the civil magistrate are only those that God has authorized. Why? Because the state is "God's servant" even on the tax issue (v. 6).

A study of 1 and 2 Samuel demonstrates that the powers of civil government are delegated from God, enumerated by God, limited by God, and are specified by God at a granular level. Even David (the man after God's own heart) was severely rebuked and disciplined when he engaged in a kind of census that was not authorized by God (2 Samuel 24). He could have pointed to a very specific and limited census that the law authorized (Numb. 1), but David didn't bother to excuse himself because he knew that he could not generalize from that very limited kind of census to the much broader census he was engaging in. Proof-texting out of context does not work with God. This illustrates that civil actions must be justified at the granular level from the Bible. Unless the action of government is specifically allowed, it cannot be done. Can they justify a sales tax in the Bible? I think not.

The Constitutional case against interstate sales tax collection

But my constitutional case is even easier. The Constitution explicitly forbids what states and feds are clamoring for. If you read the original intent of the phrases of the Constitution (buy The Founder's Constitution for a line by line exposition from the writings of the founders), you will see that our founders intended to create a huge free trade zone between the states. Principle after principle in the Constitution forbids what Trump is calling for. Here are some salient points:

  1. Article 1 Section 9. "No tax or duty shall be laid on articles exported from any State."
  2. Article 1, Section 9 also says, “No Preference shall be given by any Regulation of Commerce or Revenue to the Ports of one State over those of another; nor shall Vessels bound to, or from, one State, be obliged to enter, clear, or pay Duties to another.” Notice the obligation with regard to duties. Also notice the preference phrase. With no recourse to states that do not already have unconstitutional laws in place to collect taxes, and with taxing jurisdictions ranging from 0% to over 13%, I believe the preference issue has a bearing.
  3. Article 1, Section 10, paragraph 2 states, “No State shall, without the Consent of the Congress, lay any Imposts or Duties on Imports or Exports, except what may be absolutely necessary for executing it’s inspection Laws: and the net Produce of all Duties and Imposts, laid by any State on Imports or Exports, shall be for the use of the Treasury of the United States; and all such Laws shall be subject to the Revision and Control of the Congress.” Two things violated in this paragraph: First, all such monies collected can only be collected for the United States Treasury, whereas the taxes proposed in Bill 44 are intended for the State Treasuries. Second, all the laws controlling such taxes must be under the control of the Congress, whereas with the current provision, states can change their tax rates without permission of Congress – thus no control.
  4. This next point requires two steps to process. First, Article 1, Section 8, second to last paragraph, forbids anyone but Congress legislating for the District of Columbia. It says that Congress must “exercise exclusive Legislation in all Cases whatsoever, over such District [i.e., Washington, DC]…” Second, this bill would require businesses in DC to collect taxes for our state. However, since bill 44 is not a Federal Tax, but is a Nebraska tax imposed on citizens of other states and districts, it is unconstitutional.
  5. This bill would give taxation without representation. If it is objected that the business is not being taxed, but is simply passing the tax on to the customer who does indeed reside within the state, I would ask three rhetorical questions that show the falsity of this objection: 1) Does the tax passed on negatively impact the online merchant’s sales? If so, the economic impingement is a tax, even if it is called something else. 2) Is there a cost to a business (beyond the software applications that States are required to provide) to be able to accurately collect the taxes from every jurisdiction? If so, it is a kind of tax. 3) Are States in which the business is not located imposing any other kind of economic burden that impacts their ability to export goods? If so, it is a kind of tax.
  6. Commerce Clause guarantees free trade among the states.
  7. Commerce Clause gives permission to Congress to regulate commerce and forbids the States from regulating commerce, but Bill 44 does the opposite. It gives the states permission to regulate commerce. It thus flips the Commerce Clause on its head.
  8. Federalism: contrary to those who might claim that this increases federalism, it actually weakens it in two ways: First, it weakens State borders by giving States power to insert themselves into other States. Second, it weakens State borders by giving taxation power to states over businesses in other states and does so without representation and without recourse by due process. This all contributes to weakened State boundaries and an increased Nation-State status for the USA. I am a big proponent of Federalism and States rights, but this was not the kind of federalism envisioned by our founders.
  9. The Due Process Clause is undermined since there is no way for a business to protest an unjust tax (or the $10 penalty for each non-compliance of paperwork required) if they do not exist within the borders of the state that is unfairly treating them. (See number 5 above.)
  10. The impossibility of Nebraska enforcing this on any but big companies (many ma and pa organization could easily get around it) violates equality under the law and equal application of the law. This could be construed as favoritism to small businesses, just as it could be argued that the very biggest online companies (such as Amazon) would like this arrangement because it gives them an unfair advantage. It is the medium sized businesses that would suffer the most.
  11. Finally, this would drive some businesses outside the country and would be a bad economic decision. The "emergency" of our tax deficit should be fixed by cutting spending, not by raising taxes. Commenting on the National Fairness Tax bill that has not yet passed, Steve McGuire’s Congressional Research Service reported in the Congressional Record – Senate, March 21, 2013, p S2104, “Finally, some have noted that U.S. based retailers may respond to the expanded state tax collection authority by shifting operations outside the U.S. to avoid the collection burden. The costs of moving operations and increased shipping costs, however, would seem greater than any benefit conferred by avoiding the collection burden.” His whole testimony is revealing, but this sample shows that the burden of such a tax scheme is so burdensome that it only “may seem” to be less than forcing the company out of the United States. If taxation were that onerous, it might possibly violate the tests that have already been established by the United States relative to the Commerce Clause and the Due Process Clause. See discussions on Schechter Poultry Corp v United States, 295 U.S. 495 (1935) to Katzenbach v. McClung, 379 U.S. 294 (1964), to Quill Corp v. North Dakota, 504 U.S. 298 (1992), to United States v Lopez 514 U.S. 549 (1995)

Here is another article on Nebraska's proposed sales tax:

If you value freedom, please oppose the interstate sales tax. And while you are at it, since over 90% of what the Feds are doing is unconstitutional, please Downsize DC.