Should Gov Mandate Internet Sales Tax?

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This topic contains 4 replies, has 3 voices, and was last updated by  Mark Hammer 4 years, 9 months ago.

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  • #178494

    David B. Grinberg
    Participant

    CNN reports:

    • "The U.S. Senate is expected to vote on a long-debated Internet sales tax law Monday, paving the way for millions of consumers to start paying sales tax on online purchases."

    • "The legislation would allow the 45 states (and the District of Columbia) that currently charge sales taxes to require large online retailers to collect tax on purchases made by their residents. The law would only apply to online sellers that have sales of at least $1 million in states where they don't have physical operations, like a store or a warehouse."

    • "Proponents argue that the proposal would not create a new tax, but rather enforce the collection of taxes already charged at brick-and-mortar retailers."

    • "If the bill is enacted, academic studies estimate that more than $12 billion in additional sales taxes will be collected from online purchases each year."

    QUESTIONS

    1) Should Internet sales be taxed at the national, state or local levels?

    2) If yes, why? If no, why not?

    * All views and opinions expressed herein are those of the author only.

  • #178502

    Mark Hammer
    Participant

    Where a bricks and mortar store cannot just pick up in the night and relocate to another place where the laws of the land work to their advantage, and the laws of another can't touch them, e-commerce can. After all, dot com has no nationality. I don't understand why a retailer couldn't just register their site in a foreign country. Heck, I order from well-established big places that are American-owned, but have a "special" website for Canadians, and a warehouse just inside the Canadian border, such that stuff can be technically shipped "from within Canada" to avoid a bunch of fees. Would the proposed law cover e-retailers that ship to the continental US from just the other side of Niagara Falls or from Osoyuuz, BC or St. Stephen, NB.

    And what's to stop them from looking like they're American, charging the sales tax to unsuspecting consumers who think they're being good citizens, and pocketing it outside the reach of federal agencies? Strikes me that there is a lot of reality missing.

    I think what is being proposed is an entirely appropriate, fair, and sensible idea, in theory, but in practice I'm not so sure it's a good fit. You may end up having to spend as much on enforcement, or processing rebates for those whom the law does not cover, as you get in taxes collected.

  • #178500

    Peter Sperry
    Participant

    This is a very old issue, literally going back over 100 years, with a new name and more attention because the internet is involved. Mail order companies such as Sears, Montgomery Wards, Beans, etc faced off with the states over the sales tax collection issue during the days when catalogues were paper and delivery was by horse drawn wagons.

    The arguments were the same then as they are now. The states wanted the retailers to collect the taxes from residents of their states regardless of where the retailer was located. The retailers did not want to deal with 50 (or even 48) different sets of sales tax rates and regulations. The states refused to standardize and the retailers dug in their heels. The volume in those days simply was not enough to make the fight worth the effort. So both sides let it drop.

    Today the dollar amounts are much higher. So the battle has been reengaged with new terminology. But it is still the same basic issue.

    Another point to keep in mind is the degree to which this is a back door gift for current large online retailers. There are major IT cimplexity issues which must be overcome required for retailers to calculate, collect and transfer sales taxes for each of the 50 states with different rates, different regulations etc. This is not a problem for large well established retailers but a significant barrier to entry for small mom and pop shops trying to sell on the internet. The Senate bill essentially cements the 1 percent of very wealthy internet retailers in place while freezing out the 99 percent of small businesses who would like to grow larger but simply cannot afford the computer system necessary to comply.

  • #178498

    David B. Grinberg
    Participant

    Thanks for the excellent and insightful comments, Peter and Mark, which are always very much appreciated. I think this is bad public policy for many reasons, including the points you make.

    Another issue is that if a tax on Internet sales is enacted, then what's next? This is a slippery slope and may casue a tsunami of similar tax proposals for a range of online activity, not the least of which is web-based sales.

    On another level, this may be viewed as politicians rewarding the same colossal corporations which bankroll their campaigns -- that good 'ole shell game: you (politicians) get my back and I (Corporate America) will get yours.

    Let's keep the Internet free from taxes -- period!

    DBG

  • #178496

    Mark Hammer
    Participant

    I see in the NY Times today that Pfizer is considering selling Viagra on-line to those with a prescription. Tax that, and that should just about cover the deficit.

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