Why it's time to tax Internet sales

[Renew Deal]

E-commerce companies are no longer babes in the woods needing tax exemptions to get established

Buying an $800 couch or television via the tax-free Internet can be nearly $80 cheaper than a purchase made in a high-sales-tax city like San Francisco -- such a deal. But the free ride is costing states and cities billions of dollars a year, and it damages local businesses that find it hard to compete.

The Main Street Fairness Act, introduced this month by Rep. Bill Delahunt (D-Mass.), would end the exemption for big Web retailers like Amazon.com and eBay that fear the change would be a body blow to their business. The Web sales tax issue has been debated and litigated for years, and it is hardly a popular cause, but with state and local governments deeply in debt, the chance to add a massive revenue stream may outweigh the political risks.

The seven-term Delahunt will not be running for re-election, but it would be unfair to see the timing as opportunistic. Delahunt sponsored a similar bill in 2008. I don't enjoy paying taxes any more than the next guy, but Delahunt was right then and he's right now. The Internet is no longer a baby that needs to be cosseted and protected from the real world, and favoring Internet business over brick-and-mortar ones via a tax exemption is not fair.

The budget hole provides the necessary opening for equal taxation
If you want government services, someone has to pay for them. The amount of money governments are losing due to the exemption is staggering. Uncollected use taxes (a use tax is pretty much the equivalent of a sales tax) for the six-year period ending in 2012 will range from $52 billion to $56 billion nationally, according to a 2009 study by economists at the University of Tennessee. New York City alone will lose at least $390.6 million in 2012; Chicago $229 million, they predict.

That huge black hole hasn't gone unnoticed, and several states (including North Carolina, New York, Colorado, and Rhode Island) are working on a separate track to change the rules. More states are considering similar action. And despite what you may have heard, don't think the 1998 Internet Tax Freedom Act forbids such taxation -- it doesn't. (More on that in a bit.)

On the other side are the big Internet retailers, such as Amazon.com and eBay, which have fought hard to maintain a status quo that gives them a marked advantage over local brick-and-mortar merchants. Amazon.com, the largest and best-known Web retailer, has fought efforts to collect sales tax from customers. The company argues that the crazy quilt of taxing jurisdictions -- there are approximately 8,500 in the United States -- makes doing so impractical.
<snip>

http://www.infoworld.com/d/the-industry-standard/why-its-time-tax-internet-sales-547

I don't necessarily agree, but I'm sure DUers will find it interesting.

[NashVegas]

1. Sadly, I Agree

I'm sure I've benefited from lack of sales tax on the internet, hundreds, maybe even thousands of dollars.

The social engineering that went on in giving the online stores that tax break has hurt our local stores like hell, hurt our community coffers like hell and cities and states are being forced to slash budgets due to lost taxes.

I'll still buy, online, items I can't find in my local stores or items that my local stores demand far too much a price for, and a sales tax won't stop me.

[Newest Reality]

2. A better solution?

Tax the rich and quit pouring money into war.

[gratuitous]

3. Well that's just crazy talk, that is

Whoever heard of such a thing?

[Newest Reality]

17. I know!

I just get these ridiculous thoughts now and then. Don't know what makes me think thought crimes.

Maybe medication would help that?

[stray cat]

4. NY already does and others should follow suit

[Renew Deal]

5. I imagine it can be done if there is a database of taxes per zip code

But managing that is a job in itself.

[Edweird]

6. How 'bout we tax some higher income brackets instead of sticking it to the little guy yet again?

[Warren Stupidity]

9. communist!

[Liberal In Texas]

18. Agreed. This is just another middle class tax all dressed up to look like

a program to aid small businesses. Bull.

Tax the uber-wealthy and end the wars.

[closeupready]

20. Those two proposals should be the FIRST things discussed

in discussions about tax revenues.

[sui generis]

7. we already tax internet sales

in the state of purchase.

I don't agree at all.

It's time to STOP outsourcing our jobs and manufacturing. It really is that simple.

[Warren Stupidity]

8. Kill the growth to subsidize the rich!

yeah team!

State governments are hurting because the economy is not generating enough jobs to pay enough state and local taxes to keep non-deficit spending state governments functional. Back in the 70's the federal government knew enough to provide block grant funding to keep state services operating in hard times, a lesson learned from the 30's. But we went Duopoly Stupid in the Reagan Era and now think that we can once again Hoover ourselves into recovery.

Bail out billionaire banksters, screw state and local governments, fuck social security, kill the internet economy, 700B+ year on war. That is some change alright. Chump change.

[Juche]

10. I don't like it, but it is probably necessary

[Toucano]

11. Agreed. But wouldn't a VAT simplify collection?

There is no justification for a book bought at Amazon.com to be exempt from sales tax.

[underseasurveyor]

12. When companies like exxon/mobil that make billions in profits,

Who btw didn't pay a single fucking dime of federal taxes for 2009, start paying their share..... then I MIGHT warm up to an internet sales tax. Maybe! I doubt it but maybe.

[TreasonousBastard]

13. Add sales tax and shipping and the deal isn't so good any more, but...

this argument has been going on long before the internet.

Nobody ever heard of catalogue sales? Mail order? Is there really a difference between calling an 800 number, sending a check with an order slip, or clicking a mouse?

Previously, the argument was that L.L. Bean couldn't keep track of all the different sales tax rates, and besides, out of state sales never were taxed for some reason lost in fiscal theory.

Now, however, setting up a tax database is easy enough, and there are ways to tax just about anything no matter what your fiscal theory may be.

[4lbs]

23. Actually, I've found quite a few items that if I added shipping and sales tax for my state, it still

winds up being cheaper than if I bought it locally.

Some items, say, are MSRP $89.95. Stores locally would sell it for about $79.95. Amazon would have it for $59.95.

Even with $10 shipping and 9.5% sales tax for CA, it comes out to a grand total of $75.65.

If I bought it locally, I save the $10 shipping, but with 9.5% sales tax on a $79.95 item, it comes out to $87.55 or almost $12 more.

The key thing is that you'll be paying the same sales tax anyway. However, if the difference between the Amazon price and the local store price is greater than the cost of shipping from Amazon, it will still be cheaper to buy on Amazon.

[taught_me_patience]

14. Hell yeah I agree

Amazon has an incredible tax advantage over local brick and mortar.

[jp11]

15. Main street fairness, my shiny metal...

There isn't money that is being stolen or taken from local retailers you'd have to have that sale before it could be stolen, that people choose some other way to get this or that doesn't mean they would have gotten it at all let alone in their state from a brick and mortar store. Taxing the e-commerce sites like Amazon just gives the advantage to big retail chain stores not the lauded small town stores, if they exist they sure have a shot at 'catching' a sale that might have been transacted online but there is no guarantee it won't go to a big chain store several miles away.

The alleged 'lost' revenue is paid in part through the shipping of those sales, both on the side where they get sent out and picked up by employees of; UPS, Fedex, USPS, and freight carriers for larger items, then again by UPS, Fedex, and USPS when those employees on either side are paid for all the extra work they do in delivering them. When those sales dwindle, less people are needed to make the deliveries, less pay, less actual income from the sale of fuel, the state tax on their wages, etc. It is trading what you have for what you hope to have and it may have the effect of slowing sales where people don't make the purchase of those expensive items because of the taxes. Money people save with internet sales can go to other purchases or simply regular expenses if they can't depend on that savings there may not be money to make the purchase.

If local governments need more revenue they should tax the rich more, or could look at something along the idea of adding a small increase to the state sales tax for a temporary period as has been done in the past.

If an internet sales tax has to happen at the very least it should be set across the board at a reduced level than the average state's tax as an online retailer has disadvantages when competing with physical stores such as not having the ability for customers to check out their products in person, shipping and handling fees, dealing with shipping errors/damages, returns on products, and often a lack of anyone to sell a customer on any product or additional product.

[joe_sixpack]

24. I would agree

I don't think all this business would necessarily find its way back to brick and mortar stores. Online shopping through ebay, amazon etc. is probably one of the few things keeping the US Postal Service going right now. Letter mail is dwindling and will never go back to previous levels. You'd be surprised at the increase in parcel shipments during the last ten years or so.

[End Of The Road]

16. Please Wiki "Streamlined Sales Tax Project"

It's been an ongoing effort since 2000 to simplify collecting and remitting sales tax for e-commerce.

Until recently, I was a bookkeeper for a small e-retailer, and the mere thought of having collect/remit sales tax to 50 states was daunting. You ought to take a look at some jurisdictions's websites -- absolutely horrific.

There needs to be a uniform e-commerce sales tax established for all states, a central clearinghouse for reporting and remitting, and some sort of enforcement provisions established before this is going to work.

[mkultra]

19. The added weight of shipping AND taxes will kill internet business.

How abotu we just raise taxes on the rich instead of on low income purchasers.

[Fumesucker]

21. An *extremely* regressive tax on mostly the little guy..

Keep in mind that it's the _buyer_ who pays the sales tax, not the seller.

How progressive of you. :eyes:

[4lbs]

25. That's the way it's always been, even with local bought stuff.

So, I don't get your point. Unless you are railing against all sales tax.

[Fumesucker]

26. I'm against expanding regressive taxes..

Other than food, which isn't taxed in my state, and gasoline I don't buy much locally, there is a paucity of stuff I want in the stores and if I wanted the cheap Chinese crap that's mostly sold retail I'd just buy it off ebay straight from the Chinese themselves.

Why can we not tax those who have the wherewithal to pay, why does it always have to be the little guy who is just scraping by (or maybe not even that) who has to pay increased taxes?

[4lbs]

22. I agree that it's long past due that online sales be taxed. I'm also one that frequently buys

online.

Nevertheless, I feel it only fair that the item be taxed at the sales/use tax rate of the state of the shipping address.

So, if I buy something online and have it shipped to my California home address, then I pay the sales tax established by my state. That's around 9.5 percent.

[Johonny]

27. The original posters "story" about buying something in San Francisco is totally false.

If you live in California you're already suppose to pay the sales tax, it is on your state income tax form. Internet purchases already taxed in California.

[tkmorris]

28. I've never much cared for sales taxes in general

They are regressive for starters, and further they are a disincentive to economic activity. This is why those "tax holidays" that states often declare shortly before school starts each year are so popular. Canceling the sales tax, even temporarily, results in increased sales, good for producers, retailers, and consumers.

Of course states have to get operating funds from somewhere. We have long accepted sales taxes as part of that model, but there is no reason it MUST be that way. Perhaps it is time to consider another method to replace those funds lost due to internet sales.

[InvisibleTouch]

29. Totally disagree. Hurts both the buyer and the seller.

And not every seller is a big corporation. Some of us are individuals trying to eke out a living. Discourage sales even further than they already are with higher prices, and everyone involved gets hurt.

[jp11]

30. The current law will have an exemption for 'small businesses'

I'm more sympathetic to the argument that small businesses on the Internet could be throttled by the policy change. However, the bill Delahunt sponsored in 2008 exempted businesses whose revenue was less than $5 million. The text of the current bill, HR 5660, likewise calls for a small-business exemption, but it does not yet specify a qualifying threshold.

It isn't listed yet what the figure will be but they are at least taking that into consideration which surprised me on reading the article, I'd expected them to overlook that.