Answer:
The correct answer is: Colonies could only be taxed by their local representative assemblies
The key argument of the colonists against the Stamp Act was that taxation without representation was unjust. The colonists argued that British Parliament, in which the colonies had no representation, did not have the authority to levy taxes on the colonies. They believed that only their own colonial assemblies, in which they elected representatives, had the proper authority to tax them.
The other answer choices are incorrect:
1) While the colonists may have argued the Stamp Act tax was too high, the central argument was about the principle of "no taxation without representation"
2) The tax money raised would indeed be spent in the colonies, to enforce customs duties and fund the British presence there
3) The Stamp Act affected a wide range of commerce and legal documents in the colonies, so it did not only affect a few people
So in summary, the key argument of the colonists against the Stamp Act, as reflected in answer choice B, was that colonies could only be properly taxed by their own local, representative assemblies.