An Open Letter to Maryland Lawmakers

RE: B4UBUILD.COM Opposes the "Advertising Nexus" or "Online Sales Tax" in Senate Bill 523

Honorable Members of the Maryland State Legislature,

First of all, let me say that over the last 3 years, I have come to appreciate how difficult the job of a Maryland legislator actually is and I respect and appreciate the work that you do. My opposition to this particular legislation is not based on party loyalty or a specific ideology. Actively and strongly opposing this bill is what I am being forced to do in order to save my own Maryland business from the virtually certain results should it become law. It is not my intention to work for or against any other business, organization, association, political party, or individual. My goal is to avoid a situation where well intentioned public servants, who may or may not have been afforded the time needed to fully understand an extremely complex issue, vote to enact a law that would have disastrous effects on my family and the small local Internet business I have owned and managed for more than 15 years.

Unfortunately, for all of us, a 3-minute verbal testimony before a Senate Committee cannot possibly address all of the reasons I oppose this legislation. Please offer your patience as I attempt to explain my concerns as briefly and accurately as possible.

The "Online Sales Tax" or "Advertising Nexus" legislation in Maryland Senate Bill 523 will NOT achieve the intended purpose of raising revenue for the State by increasing sales and use tax collection. As evidenced by examples in other states, this proposal will result in a loss of taxable advertising income for thousands of Maryland residents as out-of-state vendors terminate advertising agreements with Maryland entities and transfer those advertising dollars to other states.

Maryland residents will suffer, no new tax revenue will be realized, taxable advertising income will be shifted to other states, and the remote vendors will still be selling to Maryland residents, directly and indirectly, without collecting taxes on behalf of the State. Instead of improving the financial status of Maryland, the passage of this bill will most likely increase unemployment, create additional hardship for Maryland citizens, and decrease overall tax revenue. It will also decrease income tax receipts from Maryland residents whose existing advertising agreements will be severed.

This is not my opinion; this is the only logical conclusion that one may draw after thoroughly examining the full history of similar legislation that has been passed, and in some cases already overturned, in other states over the last 3 years.

This proposal will almost certainly result in lower actual revenue to Maryland when—not if—on or before June 30, 2012, remote advertisers, including the large Internet giants and small Mom & Pop businesses, will be forced to sever their existing advertising agreements with all Maryland entities - precisely as has been the case in every other state where similar laws have been enacted (except New York; the first state to pass similar legislation, and the one state where both sides have chosen to wage this Constitutional legal battle in order to move it through the lower courts on the way to a decision by the U.S. Supreme Court).

Maryland businesses large and small, non-profit organizations, schools, religious organizations, community associations, local bloggers, and personal family Web sites will be deprived of some or all of their Web based income and/or be forced out of state to maintain their current business models as ALL advertising by remote sellers, without an existing tax nexus, will be terminated.

It is also important to understand that we are living in a global economy. The vast majority of advertising income my business receives is derived from actions taken by people in other states and other countries around the world. Home builders in Texas, Canada, and Australia — places where the home building business appears to be improving faster than within Maryland — who purchase house plans after following an advertising link on the B4UBUILD.COM Web site are not required to pay Maryland taxes. Yet, that taxable income my business now receives would also be lost as the house plans company that advertises on my Web site would be forced to revoke our agreement and send their money to Web site owners in other states.

Additionally, while I am not an attorney, it seems to me that the bill as written may cast such a wide net that ALL forms of advertising could reasonably be considered a source of nexus. Should that be the case, remote vendors may be forced to immediately terminate all advertising placed with Maryland entities in order to be certain they are in compliance with the new law — not just ads on a Web site. Advertisements appearing on local television and radio broadcasts; in local newspapers; on signs, billboards, busses; and any other form of paid advertising "whether by a link on an Internet Web site, or otherwise" could be considered a source of tax nexus.

This legislation also appears to be applicable to advertising for certain "taxable services" already defined in the tax code, as well as, some additional services currently being considered for taxation under House Bill 1071 - the possible effects of which I haven't even begun to research.

If the actual goal of this legislation is something other than increasing tax revenue, for example "leveling the playing field" for certain local businesses, and if this lay person understands correctly, then a non-revenue raising amendment should not be included in budget related legislation. If the intent is to create "Main Street Fairness" in favor of local "Big Box" stores over "Internet Giants" or my small Internet business or other small businesses who truly exist on "Main Streets" in small towns around this state, it should be brought up as a separate Bill and debated on those merits, against which I have plenty of arguments as well.

In my humble opinion, the difficulties Maryland seems to be having regarding the collection of "Use Taxes" on remote sales, which consumers may already owe, stem from a tax code that has grown overly complicated, difficult to understand, and costly for businesses and consumers alike to properly address. Why would anyone willingly assume the liability associated with determining when a food is a snack or where the customer will be eating it, what qualifies as medicine or medical equipment, how a farmer might use the "Agricultural" products he is buying, or how to "properly" round a "6 percent, as follows" sales tax on 84 cents if they did not already have a physical presence here? Difficult at best, in person, by brick and mortar businesses who are located in a finite place, virtually impossible by way of a computer connected to the Internet.

An onerous tax code with burdensome filing requirements is not fair to anyone. Making it simpler to understand, easier to calculate and submit, and holding people harmless when they follow the rules, might go a long way toward helping local businesses and increasing consumer compliance. However, attempting to force current Maryland tax laws on every person in the entire world who wishes to advertise within our state, will never work — especially when the solution is as simple as moving one's advertising dollars to a state that values that taxable income.

Please reconsider this legislation and/or postpone its enactment until such time as Maryland residents will not be so adversely affected and in such a manner that it will not force the closing of any Maryland businesses – in particular, the residential construction related Internet business that I own, which is already in a battle to overcome the economic hardships of a terrible housing market that was caused, in part, by the good intentions of others.

Your vote has the potential to determine whether or not the B4UBUILD.COM Web site, and thousands of other Maryland entities who depend upon paid advertising to generate taxable income, will continue to exist in the State of Maryland.

Thank you for your time and understanding as you consider this extremely important and complicated interstate commerce issue, which applies to the very heart of the Internet — the ability to communicate, trade, and profit accordingly on a global basis. This issue cannot be solved on a state-by-state basis. It will only be resolved when addressed at a national level by the U.S. Congress.

Regards,

Greg Susman
President, B4UBUILD.COM
Volunteer Publisher for Rebuilding Together Baltimore (which would also be negatively impacted)
Maryland Small Business Owner from 1997 to 2012 (?)
Maryland Resident from 1967 to 2012 (?)