Taxation Without Representation
By Steve Smith -- TWICE, 1/29/2007
Here's a scam no con man would ever have had the chutzpah to come up with: charge out-of-state manufacturers a business tax if they sell goods to retailers in their state even if they have no offices or employees there.
Sound ridiculous? Not to Atlantic Technology, the Norwood, Mass.-based CE maker who, since mid-December 2006, has been charged $3,568 plus daily interest by the state of Washington. Atlantic president Peter Tribeman said that it has no presence in the state: no employees, offices, warehouses or service facilities. They use independent reps who are paid by commission, sell many lines and call on CE retailers.
Papers provided by Atlantic from the state of Washington's Department of Revenue said that when filed, "the amount of the tax warrant will be entered in the judgment docket and becomes a specific lien on all inventory, fixtures, equipment or other personal property used in conducting your other real and personal property."
So far the state of Washington can't do anything with the lien since the Atlantic products in the state are owned by retailers there. But Tribeman said in an e-mail and conversation last week, "They know this but have said they will proceed with filing liens in the state of Massachusetts."
This is a tough situation for Atlantic, who will fight paying Washington. Tribeman fears that his company "is the canary in the coal mine" and that if Washington wins this case it will set "a huge precedent to throw in the face of other companies."
He noted that other states have "started coming at us," such as Pennsylvania and Florida, "but as of now are not as aggressive as Washington." In Tribeman's opinion, Atlantic was picked by Washington because "we are small enough not to put up a legal battle, but big enough to ship to retailers in their state."
Atlantic turned to the Consumer Electronics Association (CEA) and Michael Petricone, government affairs senior VP. He told TWICE, "CEA sees this as a disturbing trend. States are starved for revenue. States are redefining their economic nexus activity and are [taxing] companies that have no physical presence in their states. This is a concern for a number of reasons. It is unfair, the ultimate taxation without representation situation. The companies receive no benefits, such as police, fire or sanitation services."
Petricone added, "Our member companies have no problem paying taxes when they have a physical presence in a state."
CEA is talking with Congress about legislation that would ban this type of taxation which will be reintroduced this year. If this practice widens, Petricone said, "it will have a chilling effect on business." TWICE agrees.
Petricone recommends that if you are concerned about this issue to contact your local representatives in Congress to demand action.
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