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Is an Internet sales tax coming?

UPDATE: Adds opposing resolution from Rep. Paul W. Hodes (D-N.H.)

By Ylan Q. Mui

A movement is slowly building in Washington to banish one of the biggest perks of shopping online: not paying sales tax.

That's because the perk has also cost states as much as $23 billion in
lost revenue by some estimates, and they want it back. Rep. Bill
Delahunt
(D-Mass.) this morning enlisted Republican South Dakota Gov. Mike Rounds (R) and other state lawmakers to rally support for his
proposed Main Street Fairness Act, which would make it easier for
states to go after the money.

"We can't get a hold of it," Rounds said in an interview this morning. He said that Internet retailers "have a competitive advantage" over in-state businesses, which are required to collect the tax.

The history of Internet sales tax -- or, rather, lack thereof -- goes back to a 1992 Supreme Court decision that found that retailers only had to collect sales tax in states where they have a physical presence. Part of the reason was that each state's tax code was so complex that it became too onerous for out-of-state retailers to deal with. Instead, shoppers were supposed to keep tabs on what they bought, calculate the sales tax and pay it on their own. Of course, few people actually do this and states considered the lost tax not worth going after.

At the time of the ruling, the retailers affected were primarily catalog and home shopping channels on TV. But since then, a little thing called the Internet has exploded and e-commerce is now a $130 billion business. Now we're talking big bucks, and the states want to collect, particularly since the recession has left a gaping hole in many of their budgets.

"There is no option," he said in an interview. "It's clear that no one wants to raise taxes. This is the one vehicle that allows some relief to the states."

Rounds said in South Dakota, the proposal could net an additional $35 million per year in tax revenue, about 3 percent of the state's $1.2 billion budget. South Dakota has also worked with about 1,200 out-of-state retailers to voluntarily collect sales tax, Rounds said.

About a dozen other states, including Maryland and Virginia, considered bills this year aimed at collecting the tax and employing a variety of strategies, though they met with limited success. Some tried to broaden the definition of the "physical presence" requirement under the Supreme Court ruling to include certain types of advertisers, while others hoped to bill consumers directly for the lost tax. Online retailers that also have brick-and-mortar stores, such as Wal-Mart and Best Buy, already are required to collect sales tax online. But states say a significant number of purchases come from online-only retailers such as Amazon or eBay, which are not required to
collect.

Delahunt's proposal would essentially give states the blessing to simplify and streamline their tax codes to make it easier for out-of-state retailers (i.e. those on the Internet) to collect the sales tax. So far, 24 states have already gone through the process, but others have hesitated to undertake the project without congressional authority.

The proposal still has a long way to go. Delahunt introduced it on July 1 and it was referred to the House judiciary committee. But even if it were to become law tomorrow, states would then have to pass their own legislation simplifying the code. That means any change for you the consumer is still at least a few years out.

But no proposal is without opposition. Large online retailers such as Amazon and small, mom-and-pop outfits (think eBay powersellers) have opposed these efforts. Trade group NetChoice says that forcing online retailers to collect sales tax is an expensive business proposition.

"Small sellers will spend thousands of dollars making changes to their website software, plus endless time and accounting fees to handle exceptions, customer questions, and state tax audits," NetChoice Executive Director Steve DelBianco said.

The group cites research from the Brookings Institution that found that the amount of lost sales tax in 2008 was $3.9 billion, less than some of the bill's advocates have estimated.

That prompted Rep. Paul W. Hodes (D-N.H.) to introduce a resolution Thursday in opposition to Delahunt's bill. The resolution asks House members not to approve a "burdensome" or "unfair" tax collection requirement on small online retailers.

"The internet has opened a fast lane to further job creation and innovation, and allows our small business to compete in the worldwide marketplace," he said in a statement.

It should be noted that New Hampshire does not have a sales tax, so the point is irrelevant in Hodes's home state. Delahunt said that his bill does provide a carve-out for small retailers, but he has not determined what would be considered "small."

By Ylan Q. Mui  |  July 29, 2010; 7:00 PM ET
Categories:  Regulation  
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Next: Economic agenda: Friday, July 30, 2010

Comments


"Is an internet sales tax coming?"

Yes! Yes there is!

What else is left to tax? The air we breath? But then, we're polluting that so badly, soon we'll need oxygen tanks, or else die an early death from cancer, so they'll be able to tax us on that also.

Posted by: helloisanyoneoutthere | July 29, 2010 11:55 AM | Report abuse

"Part of the reason (for the 1992 Supreme Court decision) was that each state's tax code was so complex that it became too onerous for out-of-state retailers to deal with..."
----------------------------------------
Has that changed? If I buy at my local store, I pay a basic State sales tax, a city tax, a local transportation tax, and could pay county tax and special assesments if they pass in the next election. Also, some items (primarily food items) are not taxed.

As it stands today, I would imagine each vendor would need to obtain the appropriate business license, calculate sales tax on the city level, collect the tax, remit the tax with appropriate paperwork on a regular (quarterly?) basis to EACH taxing authority. There would be MASSIVE cross-checking involved, even with computerized forms (think IRS). Granted, a lot of clerical accounting jobs would be created, still, it's not too productive.

Posted by: Anonymous | July 29, 2010 11:56 AM | Report abuse

I agree with the proposed legislation. Bricks-and-mortar businesses have to collect Sales tax. They compete directly with online sellers in many cases. Sales tax introduces a price disparity that hurts local businesses. State and local sales taxes are intended to collect money based on purchases (which helps correct for under-reported income), and use those funds to pay for local services such as police, fire, parks etc. Now that more business occurs online, those intended revenues have dropped off. In my opinion the Main Street Fairness Act is modernizing the law to catch up with the reality that so much business is now being conducted online. Technology has made it easy for sellers to manage inventories, shipping, targeted marketing etc. And there are companies that have automated the sales tax collection process.

Posted by: bvaccaro1 | July 29, 2010 11:58 AM | Report abuse

I thought that we always owe sales tax, it's just that if the retailer doesn't collect it we have to send it to our state on our own.

Posted by: Anonymous | July 29, 2010 12:02 PM | Report abuse

"Main Street Fairness" which aims to equalize the positions of the Main Street-based merchant with the internet-based merchant can be accomplished two ways.

How about really boosting the economy by removing sales taxes from Main Street-based sales? This would both make for a level playing field as well as significantly boost the economy.

These politicians always seem to focus on raising taxes, not decreasing them.

Posted by: bill58 | July 29, 2010 12:02 PM | Report abuse

A democrat joining a republican to push this. A republican idea of "no more taxes" out the window.

Posted by: Anonymous | July 29, 2010 12:15 PM | Report abuse

How about this...the state and federal government stop spending!

Posted by: Disgusted | July 29, 2010 12:18 PM | Report abuse

It's not so hard if the tax were based solely on the physical presence of the seller, not the buyer. It is a "sales" tax, not a purchase tax.

Posted by: Anonymous | July 29, 2010 12:18 PM | Report abuse

It would be about time.

Posted by: elderbetty | July 29, 2010 12:21 PM | Report abuse

I agree with taxing all sales equally, regardless whether they're done in person, by mail, by phone, or by interent. It's just plain unfair to make retailers that collect sales taxes compete with retailers that don't. Furthermore, it's best to have taxes that are low and broadly-based instead of taxing some things and not others. What's so special about the internet that should give it a a "tax-free zone" status? If there's going to be a retail sales tax, then it should be applied to ALL retail sales.

Posted by: Anonymous | July 29, 2010 12:23 PM | Report abuse

bvaccarol1 writes: "Sales tax introduces a price disparity that hurts local businesses."

Local businesses are free to avail themselves of the internet and achieve the same benefits. So, it makes little sense to try to claim there's unfairness or disadvantage. There's a failure by the local businesses to make optimal tax planning decisions, but nothing else.

Consumers shouldn't be made to subsidize the poor decision-making of local business persons.

Posted by: Anonymous | July 29, 2010 12:27 PM | Report abuse

Anonymous is correct about always owing sales tax, at least in Maryland. But the record-keeping for individual households would be onerous, and evaluating "letter of the law" filled-out MD207 forms would cost more than the money brought in. In practice, the state doesn't care unless your order is thousands of dollars. That $10 book you bought from Amazon? They don't care. But that new souped-up PC you bought online for $3000? Yep, you are expected to declare that with your tax return and pay the 6% sales tax.

Posted by: Anonymous | July 29, 2010 12:29 PM | Report abuse

Far more likely this is the beginning of the push for a national sales tax. It would be far easier for Amazon to collect a national sales tax and let the government dole it out proportionally to the states.

Posted by: Anonymous | July 29, 2010 12:33 PM | Report abuse

Correction/Clarification: You don't have to itemize what you bought and how much it cost. Just declare the total. The problem is keeping track of everything and holding onto the records. That's why I said the state of Maryland only cares about the big stuff.

Also, Amazon may already charge MD tax. I can't remember. But most of the small sellers associated with Amazon don't.

And I'm not trying to advertise for Amazon. :-)

Posted by: Anonymous | July 29, 2010 12:34 PM | Report abuse

I make my living providing ecommerce programming and consulting services for small to mid-sized businesses.

The difficulty arises not with the collection of sales taxes for 50 states. That is manageable, though a significantly increased accounting burden especially for the many small businesses, including brick & mortars, that sell on the Web.

The difficulty arises once the legal obligation shifts from collecting with respect to the seller's location to the buyers' location, for there is an endless shifting maze of local and regional taxes "out there," for which no business, let along a small business, ought to be legally liable to make and then distribute accurate collections.

A world in which every tiny online business is responsible, legally at risk, to each and every tiny, podunk town and dirt-road district's taxing whims is simply unacceptable.

That said, it is manifestly inequitable that taxes are not collected on Internet sales.

The most manageable solution would be a national Internet sales tax, to be redistributed to states and localities. The redistribution scheme would necessarily be complex and contentious, but a national solution would take that complexity away from the virtual doors of small online businesses where complexity would impose the most burden and do the most economic damage.

Posted by: Anonymous | July 29, 2010 12:34 PM | Report abuse

But the shipping makes up for the tax as far as "fairness" goes. I usually won't buy a large item online because the shipping is so expensive. So what do I do? I buy it locally, and pay the sales tax.

Posted by: Anonymous | July 29, 2010 12:36 PM | Report abuse

I've been wanting to cut down on my online spending--an internet sales tax would definitely help. I can just buy gift certificates for gift occasions and only go to brick and mortar when I actually NEED something. For me, this is a good thing.

Posted by: Anonymous | July 29, 2010 12:41 PM | Report abuse

Delahunt and the rest of these clowns don't get it.

Our internet economy has grown faster than others, because of the lack of sales taxes imposed upon consumers.

Main Street Fairness? What about "Botox" Pelosi's rants about "competition?"

It's bad enough when I have to start issuing 1099-K's to places like Staples and Office Depot. Now I have to collect taxes, without the benefit of re-imbursement for my costs.

Another Massachussets Yankee telling us to feed the machine.

Up yours, Delahunt. See you and Gerry Connolly in November.

Posted by: Computer_Forensics_Expert_Computer_Expert_Witness | July 29, 2010 12:46 PM | Report abuse

The system - if you can call it that - of sales tax in the US is completely irrational and inefficient. (And for a visitor from Europe the fact that sales tax is not shown on the price tag is a constant source of annoyance.) The simple solution that would also take care of the inequities as between brick and mortar shops and online retailers would be a national value added tax which is shared among states and municipalities. But that would of course be far too progressive for a country as quaintly old fashioned as the US where people still use non-metric weights and measures, write paper checks, balance their checkbooks once a month, use analog cell phones etc etc.

Posted by: Sauerkraut2 | July 29, 2010 12:48 PM | Report abuse

So now the government will be able to kill the e-commerce economy? Great. Why don't they just tax everything while they're at it?

Posted by: Anonymous | July 29, 2010 12:52 PM | Report abuse

Any member of Congress that supports an internet tax, regardless of party I would never ever vote for. A tax free internet helps small business allowing them to sell more out of state. Taxing the internet only helps big corporations that are in every state, adding a tax eliminates the small business competition for big corporations.

Delahunt would be hurting the small businesses in his state because they would no longer have an advantage to sell across the country.

Taxing the internet will cost jobs of small businesses.

Posted by: info4 | July 29, 2010 12:56 PM | Report abuse

Make it a national sales tax that applies to both internet and brick & mortar businesses. Same rate. In fact, a lower rate than the average state sales tax now. This would even things out between physical and internet merchants, and give businesses that have always paid out taxes a break.

It could either be paid federally and redistributed to states, or paid to the state where the business is located, and then a percentage would then be sent to the Fed by the states.

States can then come up with their own creative ways to attract businesses to establish themselves within their borders with other incentives, rather than tax based.

I am sure there are lots of political and logistical hurdles with this idea, but isn't that always the case.

Posted by: Anonymous | July 29, 2010 12:57 PM | Report abuse

Any politician who votes to tax the internet must be held accountable. He must be made to pay - by any means necessary. These are the lowest form of animal scum on earth.

Posted by: Anonymous | July 29, 2010 12:57 PM | Report abuse

Why not a flat rate tax of say 4% that then gets sent to a clearing house that divvies it up to send the proper share to the respective State. Smaller retailers would not have that much additional paperwork to deal with, and the States could then get a big chunk of cash. Mom and Pops would then be on a more level playing field.

Posted by: Anonymous | July 29, 2010 12:59 PM | Report abuse

I am a small online retailer and I can tell you with certainty that this is an extremely bad idea:

1) One of the key drivers of internet retailing from a customer perspective is the lack of sales tax. This helps offset the shipping costs, which are the bain of internet retailing. Enacting this tax will destroy one of the main incentives for customers and thus hurt the entire industry.

2) Most product vendors require a brick-and-mortar presence in order to obtain the dealership. There are not many "online-only" retailers of brand-name goods. Most by far are both, especially the small e-tailers. So it is not really a question of one type of store getting an advantage over another. That is a myth created by the politicians to provide cover.

3) Sales taxes vary widely even within a single state. Wisconsin alone as 4 sales tax percentages, based on the county or city you live in. One of them is temporary and tied to funding the Brewers stadium. Can you imagine having to track that for every State, especially when they are constantly changing?

4) I have looked at various proposals to streamline the local tax problem and I can tell you that they are half-hearted attempts, driven by the pro-tax crowd, to essentially blunt the criticism. There is no serious intent to solve the problem. Modifying software to account for these myriad rules and then paying a CPA to validate the amounts will be way too expensive.

5) If this is enacted, consumers will see higher prices and fewer choices. I will be forced out of business and my State will lose the sales taxes we collect at the store, and will have my out-of-work employees to deal with. Other states will never see the sales tax this bill is supposed to provide to them. It's a loser all the way around for regular people.

6) The only winners here will be the large national chains that have both brick-and-mortar, and websites. They include Barnes & Noble, Best Buy, Dick's Sporting Goods, JC Penney and others like them. This plays right into their hands.

I don't pretend to be objective. Obviously I have a dog in this fight, but I am speaking from a position of knowledge. This is another blow to my business in an extremely tough economy. I am barely hanging on now. This type of thing would be fatal.

Posted by: allknowingguy | July 29, 2010 12:59 PM | Report abuse

Layering sales tax on top of shipping charges will greatly reduce on line sales.
I do understand the loss of revenue to states/localities, but will the "gubmint" cut off its nose to spite its face????

Posted by: usnr02 | July 29, 2010 1:02 PM | Report abuse

Good story, but the reporter need to do more research, including basic fact-checking. Internet retail sales exceed $130 billion in the US by a long shot.
With state and local sales taxes for within-state sale of small items far exceeding differences in shipping costs attributible to distance and buying out-of-state, there's even implicit support for shipping companies in the current regime of tax-dodging. A California customer saves by buying electronics from an online NY retailer even though the product came through a CA port. In the competitive mass market 7% is a lot of price-disadvantage to overcome.

The internet just makes irregular application of local sales taxes more visible than during mail-order days.

Posted by: incredulous | July 29, 2010 1:03 PM | Report abuse

I live in DC. I already pay a sales tax on all my internet purchases. Are we speaking of a NATIONAL sales tax? Like VAT?

Posted by: Fabrisse | July 29, 2010 1:06 PM | Report abuse

Sure lets tax the internet and I think a meter on the toilet would be a good idea. We are already taxed on the water but maybe a "per flush" tax is in order.

We all know we can trust the federal government to spend our tax dollars in a judicious and fiscally responsible way.
By all means lets just tax that nasty commerce to a grinding halt. We are nearly there anyway.

BTW brick and mortar stores will be going the way of the dinosaur

Posted by: Anonymous | July 29, 2010 1:06 PM | Report abuse

It's going to happen, along with tax on internet gambling and it's going to happen globally.

Sensibly. Rationally. And, like the proposed renewal of taxes on the rich, it will not drive up prices for consumers or kill jobs and it will not kill internet sales. Either way companies and people will be forced to reckon with their public responsibility to their society. That is heresy in the US but accepted practice in all other advanced countries.

America is still a bit of a redneck colony society despite its economic and political power.

Posted by: walden1 | July 29, 2010 1:07 PM | Report abuse

I did a large study of e-commerce growth a couple of years ago and while taxes plays a small part the largest contributor to growth by far was the reduced capital needed (as in nearly zero) to start an e-commerce business and the near zero incremental cost to have a store-front on the Internet.

Posted by: Anonymous | July 29, 2010 1:09 PM | Report abuse

We already have a flush tax in Maryland and the tax on the air you breath. Close cap and trade is a tax on the Co2 you exhale. Cut the size of government and then cut taxes!

Posted by: Anonymous | July 29, 2010 1:12 PM | Report abuse

This has nothing to do with "fairness" and everything to do with efficiency.

The "tax advantage" of internet businesses is largely offset by the need to charge shipping. People don't buy things on-line because they don't have to pay tax. They buy things on-line because you can find the best selections and deals on-line. In other words, the internet is an inherently more efficient distribution model. "Main Street" wants to tax the internet as a sort of internal import duty to protect their domestic markets.

This is the Walmart controversy of 20 years ago all over again. Should people be effectively required to pay higher prices to subsidize a less-efficient "main street" distribution model? As someone pointed out, these same stores are entitled to get off of their duffs and exploit the internet themselves. Many have done so with enormous success.

As for the states' "right" to sales taxes. Well, if it is either politically or economically too expensive to collect them from your own citizens, don't try and impose those costs on someone else. There is also surprisingly wide-spread consensus that states need to get their spending habits under control before they impose additional taxes. If you patch over the current mess with new taxes, we will be in the same mess again in three or four years. Several states have voted on tax increases lately and almost all have said "No."

Posted by: Anonymous | July 29, 2010 1:12 PM | Report abuse

Just to be picky this article estimates a $23B loss on an estimated $130B worth of business.

That works out to 17.7%. I live in Los Angeles one of the highest sales tax regions in the country with 10% (+/- a bit depending on city).

Where did the author get his numbers?

Posted by: jsa26 | July 29, 2010 1:12 PM | Report abuse

How about if they cut waste? How about getting rid of all the duplicitous Sept 11 programs THAT HAVE no VALUE, or paying farmers not to grow food, or THE BILLIONS WASTED ON THE WAR ON DRUGS OR any of the other BILLIONS of dollars of our money that the government is WASTING. NO MORE TAXES, CUT WASTE YOU LAZY A-HOLES! stop wasting our money!!!

Posted by: shrshot | July 29, 2010 1:15 PM | Report abuse

"it's NOT 'raising new taxes', it's NOT 'raising new taxes', it's NOT 'raising new taxes', it's NOT 'raising new taxes', ..."

Honestly what are they going to do, just give tax-breaks to local business based on revenue generated from taxing out-of-state Internet sales? LOL

Seriously you'd think that they were smart enough to believe their own anti-tax hype. If taxes really are bad for business, then why would charging tax on Internet sites be good for local businesses, who would lose that much more business due to the increased taxation?

Seriously a 5% sales-tax isn't going to matter a damm to me one way or the other. I just think that this whole argument is funny. Because it's inane.

Posted by: dubya1938 | July 29, 2010 1:16 PM | Report abuse

The fact is that people are legally obligated to pay sales tax on out of state purchases. It would probably be easier for out of state retailers to remit sales tax on each purchase. The other option is that a retailer could send us a 1099 for each purchase and then we could tally the forms up at the end of the year.

Posted by: weiwentg | July 29, 2010 1:16 PM | Report abuse

Politicians make me sick.

Posted by: moebius22 | July 29, 2010 1:17 PM | Report abuse

A sales tax would negatively impact many online sellers, especially those who sell for ebay or such. Already, ebay sellers contend with listing fees, seller fees, PayPal fees, shipping costs, and purchasing most items for resale at retail prices on which taxes have been paid.

Posted by: Anonymous | July 29, 2010 1:25 PM | Report abuse

BTW these are states asking for tax revenue, not the feds. FWIW Forester estimates e-commerce in the US (not sure it that includes US citizens buying from foreign companies) at $172b. 17% sounds high, it's probably more like 7-8% in most high-taxing districts. Still it's not insignificant.

Posted by: Anonymous | July 29, 2010 1:26 PM | Report abuse

So in a time that is considered one of the worst economic down turns since the Great Depression the government wants to tax us even more. My county & state taxes have gone up since this depression has started now I'm expected to pay more? How exactly is this suppose to help small businesses? Don't try and hide behind "helping small businesses" it's insulting to us all....just like when you guys decide to take more of my civil liberties away in the name of public safety...shmucks the whole lot of you!

Posted by: dworrell | July 29, 2010 1:29 PM | Report abuse

"Bricks-and-mortar businesses have to collect Sales tax. They compete directly with online sellers in many cases."

That's going to be the case regardless of whether Internet sites have to collect tax or not. And that 5% extra tax that you have to pay on Internet purchases means lost money that you could spend locally. That money isn't going to appear by magic, it's going to come out of retail sales. They would be smarter to set up websites and sell online, than to push for an expansion of sales tax to online sales.

" Sales tax introduces a price disparity that hurts local businesses."

It's the difference between stubbing your toe on a curb and getting hit by a car. People do not choose to "sit at home & shop online" vs "leave their home, go to a store & shop" because of a 5% savings in taxes. They do it because it is far easier to shop online vs the fact that they have to pay shipping & wait for orders to be delivered. Stores will always have the impulse market, the buyers who have to "touch, see and smell". Doesn't matter if they charge 5% on Internet sales or not, that's their bread and butter.

"Now that more business occurs online, those intended revenues have dropped off."

Yea that was the case when the Internet was created and people first began to shop online, you know, "things changed". Still isn't a good argument for taxing Internet sales, there's nothing here that doesn't make it just another form of tax.

Why not just charge money directly for government services?

" In my opinion the Main Street Fairness Act is modernizing the law to catch up with the reality that so much business is now being conducted online. Technology has made it easy for sellers to manage inventories, shipping, targeted marketing etc. And there are companies that have automated the sales tax collection process."

You're still missing the basic issue that this is a TAX with dubious BENEFITS if any for the consumer. Look let me explain this in simple terms. If I buy a pizza online then I pay $10 say and 5% tax that's 50 cents in sales-tax.

What am I getting for my 50 cents?

Who is benefiting from that 50 cents & how?

I certainly am not going to spend that 50cents at a local store because I just lost it in taxes.

Now you've written a long post full of generalized reasons about why this is a good idea. WHERE IS THE MONEY GOING?

Are they going to just take that tax revenue and GIVE it to local businesses? No. Should they? NO. Is life designed to be "fair" to local businesses who don't sell on the Internet in competition with Internet-based businesses? NO.
Should it be? NO.

Your argument for taxing Internet sales is that it helps to support an existing infrastructure. But you give absolutely no reasons why this should happen, much less that the benefits would match the cost to consumers. You assume that this will be a good idea, that it's "fair". All while ignoring the details.

Posted by: dubya1938 | July 29, 2010 1:33 PM | Report abuse

How would this work for the purchase of used items from sites like ebay? Do you have pay taxes on used items?

Anyway, I'd shop at brick and mortar stores more often if their prices were comparable to internet prices and they had the same selction... but they don't. It's not the taxes that make the prices or selction uncompetitive, so the equal competition argument rings hallow to me.

Posted by: Anonymous | July 29, 2010 1:37 PM | Report abuse

Nice, isn't it cool how middle class tax hikes are easy...but there is fierce debate on not extending the Bush tax cuts to the rich?

Posted by: Anonymous | July 29, 2010 1:38 PM | Report abuse

...a post full of "pie in the sky" ideas...without one freaking word of explanation as to how this will actually happen. Much less why it should.

Just that "it should happen, because this should happen, and *that* should happen, because this and that have happened".

And you don't even see this, do you?

Your solution to perceived inequalities arising out of government action is...more government action? Just that they should do the opposite of what they have already done?

Posted by: dubya1938 | July 29, 2010 1:42 PM | Report abuse

It's about time! The whole argument against taxing Internet sales has been that it was in its infancy and taxing it would hurt its growth. The Internet is no longer an infant; it has grown up, and it's time it starting paying its own way. The Internet is overtaking traditional markets as a source of goods and services, at the expense of state and local governments. A federal tax, with a portion going to the state(s) involved in the transaction, is appropriate and necessary. Internet shoppers have had a free ride long enough.

Posted by: tetter1 | July 29, 2010 1:42 PM | Report abuse

Personally, I think Internet companies should charge city and state sales tax for the places where their customers live. That should be done on every transaction. Not to do so gives them an unfair advantage over local businesses and takes tax revenue from the services which are closest to us--schools, police and fire, local highways, garbage collection and the like.

Posted by: Anonymous | July 29, 2010 1:46 PM | Report abuse

"Anyway, I'd shop at brick and mortar stores more often if their prices were comparable to internet prices and they had the same selction... but they don't. It's not the taxes that make the prices or selction uncompetitive, so the equal competition argument rings hallow to me."

Of course not. Store prices are set, while Internet prices can be set instantaneously according to a wide variety of factors. If the store doesn't have an item in the store, you're out of luck, maybe they will send you to another store, in their chain, where according to their computer they actually have it in stock. Will they tell you about a competitors' store that has the item? Will they get one from a warehouse and ship it to you? All of these things happen in the background when you shop online.

Saying that the issue is an imbalance arising out of sales-tax is like saying that the NFL champion team is better than the worst team in the worst division because the kicker puts 5% more tape on his shoes when kicking field-goals. It's just flatulent nonsense...and these are the people who want more tax-revenue to spend.

There is absolutely no credible basis for having consumers pay state tax on Internet sales. Period. I can open a store on the Internet in 10 minutes and sell goods & services & it has nothing to do with the state except for my Internet connection and the fact that I live there. Why should I bill a client $2500 for work and then they have to pay the state $120?
Why? What are they getting for that $120? How is that benefiting the "local" stores in this area in ANY way?

...why should they benefit from my online sales?

I can ship items to someone in the next state over? Those items need not ever have been in my state. Ever. Not even for a second. I just ship them from a local supplier or importer in their state, directly to them.

Posted by: dubya1938 | July 29, 2010 1:50 PM | Report abuse

"...hey state tax revenues are down 25% this year".

"I've got an idea: let's tax more stuff! Get out that list of exemptions and let's get rid of some of them. That'll increase state tax revenue!"

Sure either that or drive business out of your state. I wonder which.

Posted by: dubya1938 | July 29, 2010 1:54 PM | Report abuse

Excellent idea. I've never understood why states weren't foaming at the mouth already for this.

And there is already far more than 130 Billion a year in online commerce is the US.

Even last year, while in the midst of a crushing recession, online Christmas spending totaled nearly 30 billion dollars in the US.

Compare than to the 1 billion during hte same period in 1997.

The internet is not in any danger of being put out of business and there is frankly, an ocean of free money that we would otherwise be paying anyway in a state tax.

Posted by: Nosh1 | July 29, 2010 1:55 PM | Report abuse

The question I have is how do we know that the retailers already collecting sales taxes are actually paying that money to the government?

Living here in DC, I notice that Dell and DirecTV both charge me sales tax.

I've always been bothered that they're pocketing the cash and the DC tax office is too disorganized to know that the taxes are being assessed.

Posted by: Georgetwoner | July 29, 2010 1:57 PM | Report abuse

A tax is stupid, it will kill sales. Don't forget online you have to pay for shipping which isn't cheap; and the product online usually costs the same as in a retail store so your trading off. If you add a sales tax online, good bye online sales.

Posted by: Anonymous | July 29, 2010 1:58 PM | Report abuse

"Instead of raising new taxes, this bill is a common sense approach that allows them to collect taxes that are already owed while coming to the aid of struggling small businesses in our communities," Delahunt said in a statement.

---

No, Delahunt, it's a new tax. You're just not very bright.

Posted by: BurgundyNGold | July 29, 2010 1:58 PM | Report abuse

THEIR IS NO POTENTIAL SOURCE OF MONEY THAT POLITICIANS WILL NOT COVERT, BUT NOT THEIR OWN POCKETS.

Posted by: Anonymous | July 29, 2010 2:04 PM | Report abuse

Hate to break it to the main street retailers...but my motivation for online shopping is product availability and price...taxes rarely figure into my shopping decisions.
If I could actually find the items I need locally, I'd buy locally.
But I could live with a tax based on the location of the retailer.

Posted by: Anonymous | July 29, 2010 2:06 PM | Report abuse

This article is not well written and the reporter is not well informed. The tax rules for e-commerce weren't set up originally for catalog shopping and HSN, they were set up to GROW e-commerce, to foster the Internet.

As other posters have pointed out, the complexity of taxing down to the zip code level and below, will put MOST small Internet sellers out of business. And since the amount of tax collected by any one taxing authority, including the major state governments is TINY, the objections raised by Amazon and most other big Internet sellers are a SMOKESCREEN. They want this passed because it will put the little Internet sellers OUT OF BUSINESS. It will COMPLETELY SHUT OUT small businesses from e-commerce leaving the field open to only the largest.

Internet sales tax MUST be defeated. It MUST be stopped now.

Uncle Ron

Posted by: uncle9 | July 29, 2010 2:23 PM | Report abuse

Boo hoo, my customers already have to pay for shipping.

Boo hoo, I have to pay for my retail location.

Dodgers.

Posted by: Anonymous | July 29, 2010 2:49 PM | Report abuse

An online sales tax would NOT help small, local businesses, because they would lose far more in mail order sales than they would gain in local sales. (Big boxes like Wal-Mart know this, which is why they favor online taxes.)

Posted by: LBrettGlass | July 29, 2010 3:37 PM | Report abuse

"How about this...the state and federal government stop spending!"

I'm sure the police and fire fighters would be delighted to work for free.

Posted by: Anonymous | July 29, 2010 4:01 PM | Report abuse

One thought-

Since sales taxes and the shipping and handling charges are generally about the same, if the consumer is forced to pay higher costs for internet sales, will this impact the shipping companies, like UPS, Fed-Ex and the USPS?

If people don't order on-line, there is no packages to be delivered and to cut costs, UPS & Fed-Ex will cut employees and the USPS will just raise rates!!!!

Posted by: Computer_Forensics_Expert_Computer_Expert_Witness | July 29, 2010 5:29 PM | Report abuse

But... at the press conference there was some company offerring to do all the calculation and reporting for free. It seems they should be chiming in here soon....

Posted by: Anonymous | July 29, 2010 5:30 PM | Report abuse

Democrats for new taxes? Shocking.

Posted by: Anonymous | July 29, 2010 9:08 PM | Report abuse

I'd like to tax the hot air that comes out of the mouths of politicians. Tax them for every blowhard word released from that crevice they call a mouth, but we call something else.

Posted by: Anonymous | July 30, 2010 1:12 AM | Report abuse

Bringing in the online sales tax would hurt the government too. It would become more cost effective to buy from local dealers, and the post office would lose business. As private sector couriers lose business as well, the government loses income tax on Fedex, UPS, DHL, etc.

Posted by: Anonymous | July 30, 2010 2:23 AM | Report abuse

As an on-line retailer, the easiest way to collect online sales taxes is to have the buyer pay the sales tax of the state that the retailer has a presence in. For example, I’m located in VA so all buyers would pay VA sales tax. Otherwise, I would have to have a Sales Tax permit in every state and know the county that the buyer resides in, charge the appropriate tax (maybe even a local tax), and report the amount monthly to 50 States and US Territories rather than just one State.
If anyone should be charging sales taxes it should be the internet providers. They at least maintain the internet and provide access. What do the States do to earn their sales tax?

Posted by: Anonymous | July 30, 2010 3:45 AM | Report abuse

certainly.politicians will tax anything.like in the military if it does not move paint it.next will be a VAT.

Posted by: pofinpa | July 30, 2010 9:21 AM | Report abuse

Why not? The places I buy on line from--REI, LL Bean, Barnes & Nobel, etc.--already collect sales tax since Virginia requires residents to pay sales tax on purchases by mail and internet. Why should those firms be placed at a disadvantage?

If firms are not to be required to collect the tax, why not require them to report the purchases? Then the state knows whom to collect from.

Posted by: Anonymous | July 30, 2010 9:41 AM | Report abuse

One person suggested having the Internet seller's home state collect the taxes. This is already within the power of each state without any new Federal legislation. They will not do it because they know the seller could pack up and move to a state such as Delaware that doesn't charge sales tax.

I prefer the idea of just requiring reporting. If a state or local government is worried about the lost revenue, put the burden on them to collect use tax from their own residents rather than expecting the seller to figure out all the different state and local sales taxes and collect and pay them.

Posted by: mstein | July 30, 2010 10:42 AM | Report abuse

There should be No sales tax on internet items valued less than $30. These items are not sold by many local merchants. As noted above , shipping/handling fees equalize the playing field for these articles.

The brick/mortar shops in my area (outside NYC) generally do not stock/sell items of low value. They are frequently not available here. Not infrequently cheap articles are simply marked up in price by several orders of magnitude . The net effect is to increase the 'disposable' culture , which is unsustainable/wasteful.

Sales taxes on more expensive goods are warranted, and ought be collected.

Posted by: tbhpmci | July 30, 2010 12:28 PM | Report abuse

If there is an internet tax, it should be a fixed percent, nationwide. That would solve the problem of "complexity" of state taxes and it should be low, no more than 1 or 2 percent.

Posted by: Anonymous | July 30, 2010 1:17 PM | Report abuse

"Living here in DC, I notice that Dell and DirecTV both charge me sales tax." (Georgetwoner)

A service provider (Comcast, Cox, DishNetwork, DirecTV, FiOS) does not have the right to offer a service anywhere they want. They have to sign on to a franchise agreement in order do business in a city or county. Part of that contract stipulates that they will collect tax revenue. The fines for not doing so are rather stiff, so be sure that money you pay is going to DC. No comment on what happens after that!

The reason why this is allowed is that despite the numerous comments here that this might be a "new tax" or a "raised tax", it is neither. We have always had to pay taxes on online purchases. Heck, you have to pay sales tax on illegal purchases just as you have to pay tax on illegal income. (Ref: Al Capone) The states just do not have the enforcement right to force out-of-state businesses to collect that money for them. The proposed Act would make it easier for states to enforce that collection.

People can argue the merits and flaws of this however much they want, but when one side starts to lie about the facts ("new tax")... they must not have confidence in their legitimate arguments.

Posted by: prokaryote | July 30, 2010 1:25 PM | Report abuse

Although this bill seems like just another government money maker. I think there is a benefit that can be obtained from this tax. A leveling of the playing field. This borderless store mentality has killed the small business. They can’t compete with the low to nonexistent overhead of an online retailer. Here’s a typical scenario:
A customer expects to walk into a local store, whatever that store might be, and says ”Hey can you sell me that widget I saw online for $19.95?”.
The retailer looks the item up, after shipping the item to his location, paying to stock it, overhead for his building and knowledgeable employees his “cost” is $22.50 for that same item. He suggests to the customer he can sell him the item but it will be $29.99. And on top of that he will have to add 7-8% sales tax. What do you think the customers answer is going to be?
I’ll tell you the answer, more often than not, the customer walks. But that’s not the end of the scenario, that customer not only didn’t buy the item, he feels like the local brick and mortar store is trying to rip him off, and will tell his friends and colleagues to avoid that establishment.

After this continues for some time and the weak economy compounds the issue, the local store eventually goes out of business. The local economy suffers, there is a loss of jobs.

Adding sales tax not only will bring some revenue back to the local economy, it also has the added benefit of possibly helping the local retail businesses to have a fair playing field when it comes to selling their products. The store with the best service and most knowledgeable staff will prevail.

there is another underlying reason, that is from our evolution, and the hormones compel us to seek out mates. regardless if it is the right thing to do. I'm not even remotely justifying it, just a theory

Now I don’t claim to know all the details of the Bill, but on the surface, I would argue what I have stated here, even if it wasn’t a Tax situation, I think there needs to be some sort of regulation to keep this kind of reverse anti competitive practices in check.

Posted by: Anonymous | July 30, 2010 2:56 PM | Report abuse

Don't ever bet against death or taxes.

Posted by: cduwel | July 30, 2010 3:09 PM | Report abuse

IT'S ABOUT F&*IN’ TIME!!!!

The "I don't hold a physical presence in that state" excuse doesn't work any longer; the person who MADE the purchase has a computer, which acted as the cash register FOR YOUR BUSINESS, there-by establishing your presence in that state, at that moment.

The "Oh it will kill fledgling Internet commerce" excuse doesn't work any more either. Internet-only retailers and the Internet arm of brick-n-mortar retailers rack up more profits than Main Street retailers (to use lingo you all know).

So start paying your fair share of taxes all you Internet greedy retailers AND shoppers. Stop cheating those of us that pay our fair share of taxes by purchasing things honestly! Start being honest, valuable citizens who put forth the taxes asked for to fund infrastructure, public educations and public goods & services that ALL of us can share in, instead of cheating the system!!!

Posted by: Anonymous | July 30, 2010 3:28 PM | Report abuse

Nothing will make the World Wide Web more local that a sales tax scheme....why would any etailer want to deal with such a nightmare....but where there is a free market will, there will be a way (as the PACMAN govt chomps into the etail world in a big way!)

Posted by: Anonymous | July 30, 2010 3:58 PM | Report abuse

Why not come up with an "average" state sales tax -- say 5% -- and have internet firms add that percentage to each sale. Then, at the end of each quarter, these companies can turn over to each state the share of the tax due? You can base it on the state of the person ordering, the state to which it was mailed, or a share to each. Fair? Simple? Easy for sellers, buyers and states? Run with it, Congress! The only complaint left at that point is by those internet merchants who will lose a large portion of their advantage over in-state merchants.

Posted by: Anonymous | July 30, 2010 4:02 PM | Report abuse

There is a relatively simple way to defeat an Internet tax: Write to your representative or senator if he or she supports such a tax pledging to donate money to his or her opponent first in a primary if one is held, and then in a general election, and then actually vote for his or her opponent, being willing to cross party lines on this single issue alone. Make clear to your representative of senator that you will do this, then do it.

Posted by: Seneca32 | July 30, 2010 5:41 PM | Report abuse

*********** Technology has made it easy for sellers to manage inventories, shipping, targeted marketing etc. And there are companies that have automated the sales tax collection process.

Posted by: bvaccaro1 | July 29, 2010 11:58 AM | *****************

If you've ever worked in a corporate IT environment, you would know that this is not cut & dry - plug & play.
With limited resources & IT dollars to go around, imagine, this is not a simple journal entry.

If it stresses a big company, how it will affect the little shop on the corner??

Sorry you are ignoramusly naive.

Posted by: Anonymous | July 30, 2010 6:29 PM | Report abuse

these blood suckers want you poor and living on their dime...
keep voting for them and lose more of your freedoms...

Posted by: DwightCollins | July 30, 2010 7:25 PM | Report abuse

Most states have over estimated how much in taxes they are losing. The "numbers" Florida came up with would mean that every resident of the state, 19+ million, would have to purchase at least $1000 over the Internet every year. And this does not include those Internet purchases for which sales tax has been paid. And even if the states can agree, now you have the counties and cities that will want their additional share as well.

Posted by: gmclain | July 30, 2010 8:04 PM | Report abuse

How much of lost tax revenue from internet sales led to MD to increase their sales tax from 5 to 6%?

If this is about fairness, they would reduce the sales tax back to 5% and collect tax on internet sales. If this is about a cash grab, then they will just add to the already increased tax burden on the public.

Posted by: jjk26 | July 30, 2010 9:56 PM | Report abuse

Article I, Section 9 of the Constution of the United States of America:

No Tax or Duty shall be laid on Articles exported from any State.

Posted by: Anonymous | July 30, 2010 9:58 PM | Report abuse

Another reason to get rid of the democrats!

Posted by: dmax1 | August 2, 2010 8:47 AM | Report abuse

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