If you saw my speech to Capitol Hill staff on the topic, you know I’m strongly opposed to schemes that would allow greedy state politicians to impose taxes on online sales that occur outside their borders.
I reiterated these sentiments in a debate that was posted today by U.S. News & World Report. Here’s some of what I wrote.
The debate over the so-called Marketplace Fairness Act is not about a level playing field. It is an attempt by politicians to grab more tax revenue to facilitate bigger government. …they want to create an elaborate and intrusive system to force out-of-state merchants to act as tax collectors. …To understand why this is a radical step, imagine if you took a trip to Las Vegas and played blackjack, but then got arrested when you returned home because your state doesn’t allow gambling. That would be an outrage because a state only has sovereign power to enforce laws (good ones or bad ones) on things that take place within its borders. And it would be equally outrageous if state governments tried to force Las Vegas casinos to discriminate against non-Nevada residents.
I also explain why this type of system is bad news for reasons other than fiscal policy.
This legislation also has very troubling implications for privacy. It can only work by creating a massive database that matches online purchases with the state and local sales tax rates for every consumer. I don’t know about you, but I’m not confident that this type of untested system will be secure. We’ve already seen major leaks of confidential data from both government and private companies. This database will be a magnet for identity thieves and other hackers looking for credit card information.
If you agree, feel free to give me an “up” vote on this U.S. News page featuring all the debate participants.
I’ve had good luck in these debates, coming in first place in debates on double taxation, European fiscal policy, flat tax, and Obamanomics, so I don’t want to break the streak.
Otherwise I may have to cry and sulk, like I did after Richard Epstein and I lost the Keynesian stimulus debate in New York City (you can click here to see why we should have prevailed!).
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making an out-of-state seller comply with another states’ sales tax laws won’t be “fair” in any way. I live in Texas and hold a Tx Reseller Certificate for my business(that’s the way Tx allows a company to purchase items for resell without paying sales tax and also how I have to collect and report Tx sales).
1. Tax accounts: Large businesses, like Amazon, won’t have any issues collecting and reporting sales taxes to each state. Small online retailers, however, will! A small business will have to open sales tax accounts in every state to comply where they make sales. THINK OF THE TONS FORMS and additional costs to complete and file the reports.
2. Liability and Information:Again, my experience is only with Tx, but I had to provide lots of personal information(driver’s license, social security number, home address) in order to open the Tx account. In addition, and regardless that my business is a corporation, I am personally liable for payment of all the taxes, and must file timely reports, or pay a fine. Some businesses must post a sales tax payment bond (due to the size of their sales) and pay monthly.
3. Complexity: Each business will have lots of additional costs to comply with each states’ laws. My business is IT consulting and I once had a client that I helped with their Tx sales tax issues. Tx has 254 counties, so just to start there might be 254 various sales tax rates! Granted, Tx may not be an average example, but it still illustrates the problem. In addition to 254 counties, there are hundreds of cities and towns. Each “jurisdiction” adds their own additional percent to the sales tax rate. Now, if that wasn’t complicated, try adding the other taxing “jurisdictions”: special tax districts, transit districts, utility districts, and etc. If memory serves me, I think at that time Tx has almost 3,000 unique taxing authorities! EACH ONE could modify the sales tax rate, depending on the address. It isn’t unusual to be in one group of taxing authorities and your neighbor across the street to be in another.
4.Freedom: The law won’t increase business or opportunity ( except for software and service providers providing the services to enable a business to comply). It will add costs to EVERYONE because the business will be forced to pass their additional costs on to the buyers. So if the law is passed, online retailers may elect to stop selling to other states to avoid the extra costs. That limits all of our choices.
Like a lot of what comes from Washington, I’d suggest this isn’t “fair” and probably will cost more, both for businesses and consumers, once its fully implemented.
Jim
Yes. It’s a tax that is levied on the consumer by a state that doesn’t house the business that the consumer is purchasing goods from. I pay state taxes to online companies that are already housed in my own state. That’s where fair ends. My state has absolutely zero ownership of product I purchase elsewhere.
It is not taxation without representation, as it’s assessed on the purchaser, at the tax rate of the purchaser’s home. The purchaser presumably is represented in his/her home state. It no different from the sales tax my employer is required to collect and remit for sales from our Illinois, Virginia, or Tennessee locations to customers in any of the 50 states. Being anti-every-tax feels good, but the argument is off base.
If I were to travel across the border from Florida to Lake Park, GA to buy gasoline, what right does Florida have to collect taxes from the gasoline sale–from either me, the gasoline station or Georgia?
Along those lines, I fail to see the difference between the hypothetical gasoline sale and buying widgets from a vendor in Georgia by mail, over the telephone, or online. Since the item for sale is in Georgia at the time of purchase, only Georgia has the right to collect taxes. If Georgia should decline to collect such taxes, what business should it be to Florida?
Leaving aside the philosophical issues, there is also the practical issue of the cost-INeffectiveness of infringing on the sovereignty of the other States. Do even the most liberal of Californians, for example, REALLY want Governor Brown or his people to spend hundreds of dollars to collect $2.00 in tax that falls due whenever Jose Blo from Los Angeles decides to buy chamois cloths from Ronco? 😉
You got my vote. I can’t begin to tell you how strongly I agree with the motivation behind this legislation – it has absolutely *nothing* to do with fairness to the brick and mortars and everything to do with creating another revenue stream to the government.
The fact is that the playing field is fair as it stands and online sales occupy a niche with certain benefits greater than their own so it is in *their* best interests to attempt to nullify them, and rather than acting more competitively they petition to do that via legislation/regulation. That isn’t free market capitalism. That’s just another example of collusion.