South Carolina Senator Jim Demint thinks internet sales taxes are a bad idea and said so recently in the Wall Street Journal:
"Our nation was born from the idea of "no taxation without representation" —that citizens should not be taxed by governments in which they have no political voice. Yet now lawmakers in Washington want to overturn that bedrock principle in order to extract more revenues from American consumers.
The Marketplace Fairness Act recently introduced in the Senate would require online retailers to collect and pay sales taxes to states where they have no physical presence or democratic recourse. Overstock.com, eBay and the like could have to pay sales taxes to any state from which an Internet user placed an order, even if the company's headquarters, warehouses and sales staff are located entirely in other states.
Such online sales tax proposals are taxation without representation. The proposed federal law tells businesses that there is no escape from the clutches of tax-hungry politicians. That concept is antithetical to our federalist system, which promotes competition among our states for the best economic policies.
The Supreme Court ruled (in Quill Corp. v. North Dakota, 1992) that retailers can be required to collect sales taxes only in states where they have a physical presence. The proposal before Congress, however, would give a federal blessing for states to chase revenues far outside their borders.
Consider the absurdity of such a law. When a customer buys a product in a store, does the cashier ask for the customer's home address? Of course not. The store simply charges the state and local sales taxes applicable for its physical location, no questions asked.
The proposed law would hold online sellers to an entirely different standard. Websites would have to add taxes to a sale based on the shipping destination of the product, which may be a state in which neither the seller nor the buyer resides. We would never ask mom-and-pop store owners to do such a thing.....
The burden on Internet entrepreneurs could be staggering. There are already nearly 10,000 state, local and municipal tax jurisdictions to navigate nationwide.
Just complying with a single state's tax laws costs small businesses disproportionately more than larger firms that can afford accounting and technology teams to help them work through these arcane laws. A 2006 PricewaterhouseCoopers study found that tax-compliance costs for small businesses (those having $1 million to $10 million in annual sales) are nearly 2.5 times greater than those of larger firms. For businesses under $1 million in sales, those costs explode to 16 cents on every dollar of revenue.
And woe to online sellers if they have a dispute with one of the many states that will be unleashed to tax them. A small business owner in South Carolina could face simultaneous audits from California, New Jersey and Hawaii, with no political recourse.
Who would want to do business in this environment? That's a problem that the Senate bill's authors implicitly acknowledge, since they included an exemption for companies with less than $500,000 in annual sales. But that is a very low threshold to cross. Businesses will be discouraged from growing, encouraged to locate overseas, or even regulated out of business.
Nor would these new Internet taxes satisfy tax-hungry politicians. Already Maryland Gov. Martin O'Malley, a Democrat, has called for a 6% tax on all downloads—music, movies, e-books and more—from vendors like iTunes. It probably wouldn't be long before the burdens of complying with myriad state sales tax laws led to talk of a streamlined national sales tax to replace it, with Washington taking a cut and destroying our nation's healthy tradition of state tax competition...." Rest of essay
Saturday, August 11, 2012
Demint: Internet sales taxes a bad idea
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17 comments:
Most will agree with him. We can also look for this in our future: On any air flight, the states whose air space we cross through will be due a percentage of the ticket cost as their tax on your flight. When pricing tickets and considering travel time, we will then consider which layover spots are in states with the higher tax rates and avoid those flight legs. Then we may actually find it desirous to connect in Atlanta rather than DFW or Cincinnati may be less expensive than both.
If they sell a product to someone in Mississippi, they have a presence.
Either the state OR federal government should collect sales tax on internet sales.
People want a free ride for everything these days.
Lazy do nothings.
11:55 you are a moron. You clearly don't understand the impact this could have on small business, the main driving force of our economy.
I have a small Internet sales website. If this were to pass, I would take the site down. It would not be worth my time or the expense.
Also, how would this effect online sellers who drop ship merchandise? How many hands would be in the pie on drop ship transactions?
Hey 11:55, I will pay the sales tax if you pay for the shipping. If all the retailers didn't sell the same Chinese crap, online sales wouldn't be booming. Furthermore, Mississippi doesn't deserve this tax, because we have the highest food sales tax in the country!
All purchases on the internet are supposed to pay taxes under "Use Tax." No one ever reports them.
Its kind of like having speed limit signs and no police officers around. Everyone is going to speed. This is the easiest way to enforce already existing laws.
Jatidom, sorry but for every "small internet business" affected by it, it probably helps five small brick and mortor businesses.
Why make our local businesses be at a 7% disadvantage right when they open their doors? Just look around town at all the vacant retail spaces. I would bet a lot of the old businesses there had a hard time with this. That's property tax revenue, payroll tax revenue, and sales tax revenue, all lost. We should be helping them out.
Amazon already announced it was going to start collecting it in certain areas. They know its coming. What Mississippi ought to do to help our businesses out, is to follow the footsteps of states like Oregon. There is no sales tax. Think about how places like, Vicksburg, the Coast, Meridian, Southhaven and Batesville, would all benefit with people coming from the bordering states to shop.
I buy books form beterworldbooks.com
No sales tax and free shipping!
Why should a state collect taxes for a sale that in no way involves the state? And how could a sales tax benefit a local brick and mortar business that makes no profit on the sale.
The 'nexus' rule is stupid to begin with. No entity should collect a tax on a transaction in which it has absolutely no involvement.
But, as creative as Feel Bryant has proven himself to be, I'm sure he is working on a way to tax all the states whose shit downflows the Mississippi River through our state.
No one wants to pay more in taxes (well, almost everyone), including me, but explain to me how it is fair for brick and mortar businesses that pay rent, pay salaries, and support the local community to collect sales tax but "internet" companies are exempt? If you want to buy on-line, that is your business. I try not to. However, how hard can it be to collect the correct sales tax based on the ship to address? Heck, we can land a rover on Mars, and we can't design a computer program to figure the sales tax for each locale? In my opinion, all that does is level the playing field for the brick and mortar stores.
JimAtTheRez
So we are 'trusting' that the company that collects the sales tax will automatically report their sales in our state? Bet they don't have a program for that one. How can anyone prove what the online companies actually owe to the state? Take their word for it while the publice is getting hosed? Don't think so.
The brick and mortar stores don't lose business because of sales taxes. They gouge. Their markups are unreasonable.
Brick and Mortar stores are a thing of the past. People that talk about "leveling the playing field" and "helping the brick and mortar shops" sound a lot like Obama in '08. Yeah, slap a sales tax on online transactions. Guess who is going to pay for it? I can tell you one thing, it won't be the business owner. People that talk about "use" tax for Mississippi online retailers are ignorant also, as sales taxes are only due on items within the jurisdiction in which they are consumed (ie. not in Mississippi). If you re re's have a problem with Mississippi online retailers bringing in non Mississippi Dollars and not having to pay sales tax because of the law, then you either A) haven't looked at our rankings in a while or B) Just want the state to remain poor. Know your facts and what you are saying before your outdated education makes you look....
Tax the internet? Good luck.
Anyone that stands in the way of progressive thinking like the internet and no taxes is a fool.
Shadowfax,
1. You are already required to pay taxes on itmes purchased online. It's called a use tax. But most people don't self-report these purchases, and state tax commissions don't have the resources to enforce it. This legislation allows the state to collect this existing tax at the point of sale rather than requiring people to self-report the purchase (which they almost never do).
2. The person who claimed he'd shut down his website must not be familiar with the two proposed bills that have a chance of passing. Both would exempt "small sellers" with $500,000 or $1,000,000 in annual gross receipts.
3. Requiring bricks-and-mortar retailers to collect sales tax at the point of sale but not online retailers is unfair. I understand the "it's the law" response, but that's why we change laws, to fix some gap in the system. Online retailers don't have the showrooming problem either. An online retailer should get a sale because of a) lower retail price or b) the convenience, not because they get a 7% advantage because of the government.
4. Changing the current practice would be a logistical nightmare and will be the biggest stumbling block.
@7:03 - Amen, Brother (or Sister). It's the scofflaws who illegally evade payment of the use tax that necessitates imposition of a sales tax on internet sales. Computers make collection and remittance of these taxes quite simple.
Let's admit what this really is - a way for governments to get more revenue so they can either (1) spend more, or (2) balance budgets - while not having to directly face voters about the 'tax increase'.
Talk about the 'brick and mortar' retailers is compelling, but it doesn't face the facts of today's economy. Just as the 'government should take care of us' folks that have protected other industries. Bet many of you that are crying for the local retailers are also the same people that scream about the corporate welfare of other protectionist bills passed by our federal government (ethanol is a great example.)
If sales taxes were a national tax, then it should be collected on national sales. But it is not - so far, sales taxes have been restricted to state taxes. Therefore, states should collect them on the sales made within their states.
As to the argument that local retailers have to pay for insurance, real estate taxes, etc. don't you realize that these on-line sellers have to pay similar taxes wherever they operate their businesses? Sure, they have an advantage if someone wants to purchase only for the savings in the sales taxes. But they lose the ability to talk to a person about their purchase. Some folks want the savings while other folks want to put their hands on the product first. To each their own.
In the meantime - keep the beast from finding this additional revenue to gorge themselves on. Let them quit wasting the revenue they currently have - and anyone that questions that ANY of our levels of government aren't wasting money - let's have that discussion!
It's the scofflaws who illegally evade payment of the use tax that necessitates imposition of a sales tax on internet sales.
How much use tax did you self-report Dees? How much did August 13, 2012 7:03 AM report for that matter?
The retail sales data released was gamed to make the Kenya look good but don't expect DonnerKay and her free labor (interns) to understand any of information in the link.
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