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December 21, 2005 4:50 PM PST
Senators propose taxing Internet shopping
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Two bills introduced Wednesday propose sweeping changes to how Americans are taxed for online and mail order purchases. Businesses initially would be required to collect sales taxes on purchases shipped to roughly half of the country, and that percentage is expected to rapidly increase.
"Main Street retailers collect sales taxes, while many online and catalog retailers are exempt from collecting the same taxes," said a statement published by Sen. Mike Enzi, a Wyoming Republican. "This is costing states and localities billions in lost revenue." (A related bill has been introduced by Sen. Byron Dorgan, a North Dakota Democrat, who is a former state tax commissioner.)
At the moment, if you order something from a company that's located entirely out of state, you're typically not charged sales tax. Seattle-based Amazon.com, for instance, does not collect sales taxes when shipping to California.
Technically, you're supposed to estimate and pay these taxes voluntarily to your home state every April 15. But practically nobody does.
State tax collectors would like to change that. They complain that the Internet is sapping tax revenues and are supporting Enzi's bill to force companies to collect taxes on many out-of-state shipments in the future. Traditional retailers such as Wal-Mart Stores, which collects taxes on shipments from Walmart.com because it has physical locations in every state, are also supporting the bill.
"It is now time for Congress to provide states...with the authority to require remote retailers to collect sales tax just as Main Street retailers do today," Enzi said. Four years ago, in a CNET News.com editorial, Enzi warned: "Other forms of taxes, such as property or income taxes, may then have to be increased to offset these lost revenues."
Critics of this approach warn that it will complicate life for small businesses and be an unfair burden on states like Delaware, Montana and New Hampshire, which do not have sales taxes.
"The tax commissioners are overreaching by pressing Congress for a national mandate on a collection scheme that is still in the oven," said Steve DelBianco, director of the NetChoice coalition, which represents companies such as America Online, eBay, Oracle, VeriSign and Yahoo. "They haven't worked out the software they need to collect, a compensation system for sellers, and the states themselves are still struggling (to put policies into place). In other words, there's a lot of work left to do before pressing Congress for a national mandate."
Tax "fairness and simplification"
Enzi's bill, called the Sales Tax Fairness and Simplification Act (click here for PDF), would affect only shipments sent to participating states. If California joined the so-called compact, for instance, the bill would require Amazon to collect sales taxes even if the state of Washington objected and did not sign up.
The legislation would apply only to businesses with more than $5 million in "gross remote taxable sales" each year.
So far, 18 states have fully signed on. Those include Arkansas, Indiana, Iowa, Kansas, Kentucky, Michigan, Minnesota, Nebraska, New Jersey, North Carolina, North Dakota, Ohio, Oklahoma, South Dakota, Tennessee, Utah, West Virginia and Wyoming. Twenty-two other states, including California, Illinois and Texas, have moved in this direction.
Dorgan's office did not make the second bill, which he also introduced Wednesday, immediately available. But a "discussion draft" seen by CNET News.com would order the Small Business Administration to determine which businesses would be required to comply with the tax collection rules. Congress would be required to ratify that decision.
For mandatory tax collection to take place on mail order and online purchases, the Supreme Court has said, Congress must act. A 1992 case, Quill v. North Dakota, said remote taxing--in the absence of a federal law--violated the U.S. Constitution's interstate commerce clause.
Earlier efforts in Congress to enact such a law have failed, in part because e-commerce companies pointed to the dizzying complexity of taxes. But the states participating in the so-called Streamlined Sales Tax Project hope that if they pledge to simplify their tax systems, they can persuade Congress to make collection mandatory.
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Mike Enzi,
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But really its just a loophole that is unfair to traditonal retailers.....
Republican LIARS. Republican LIARS.
I consider it double-taxation to tax the sales of items with
money that has already been taxed (just for earning it). But the
states don't care -- they'd do much more if they could get away
with it.
What I think everyone needs to demand is some accountability.
Seems all they care about is raking in more of your money. I
wish I could just DEMAND more money from my boss with zero
accountability!!
These people will be remembered come election time!
The corporations (online retailers) are currently taxed on their revenue, and we (the consumers) are taxed on our income (both federally and, for many, at the state and local level)... it seems to me that continued taxing of "the transaction" would be the third tax assessed... and if it is done under federal law... that means it's under federal jurisdiction and control. Dang, for a republican administration and republican congress, it sure sounds like we are centralizing this control.
Finally, the internet (and incentives to buy via the internet, such as no sales taxes) is actually good for the small business or "Main Street" retailer. Basically it is one of the few remaining equalizers and ways for SMB's to compete against the big box, high volume retailers (how much is your TV at Wal-Mart or Circuit City vs. your local TV shop... in fact, are there any local TV shops left?) It is just as easy for the local TV shop to put together an online store (and trust me, it can EASILY be done)... do a little marketing and suddnely they are competitive again (and surviving to pay their taxes). Charging sales taxes for those online transactions would actually put them right back where they were... dying.
that a "sales" tax is literally a tax on goods sold, which ought to
mean that a state has no right to collect that tax from an out-of-
state seller. If a state want to enact a purchase tax that it can force
its residents to pay on all purchases, regardless of where they
occur, that is an entirely different matter.
So why are they trying to spoil one thing that makes internet so
nice?
- Technically, we should all antie up
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by hkillham
February 2, 2006 5:38 PM PST
- Technically, it is use tax that should be paid to your home state. Paying use tax is not voluntary. Ask any businessman who has gone through a state audit lately.
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