Internet

Internet Sales Tax Won't Happen in Lame-Duck Session, But Should It Ever?

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Well, this is encouraging.

A bill granting states the ability to force out-of-state websites to collect Internet sales tax is dead, according to the Ohio Republican's spokesman.

"The speaker has made clear in the past he has significant concerns about the bill, and it won't move forward this year," said spokesman Kevin Smith. "The Judiciary Committee continues to examine the measure and the broader issue. In the meantime, the House and Senate should work together to extend the moratorium on internet taxation without further delay."

A bipartisan group passed the Marketplace Fairness Act out of the Senate last year on a 69-27 vote, led by Sens. Richard J. Durbin, D-Ill., and Michael B. Enzi, R-Wyo., but it has languished in the House.

More here.

Hat Tip: Generation Opportunity.

As it stands, internet retailers generally don't collect sales tax on purchases sent to states in which the retailer has no physical presence. So, for instance, my Amazon purchases sent to my home in Ohio are gloriously cheaper than ones sent to 23 other states.

It's a certainty that at some point internet retailers will be forced to collect state and local sales taxes on all sales, regardless of physical presence. That's partly because lawmakers will eventually demand it—there's just too much untaxed money out there and expecting pols not to pounce on it is like expecting a dog to ignore a pile of hamburger meat that's right under its snoot. It's also partily because giant retailers such as Walmart will demand it in the name of a "level playing field" between bricks-and-mortar ops and mail-order companies. Indeed, after many years of opposing levying of sales tax on all purchases, even Amazon has been playing along, partly because it can absorb the extra costs more efficiently than smaller online retailers. 

There are strong arguments against forcing internet retailers from collecting such taxes (see below), but realpolitik being what it is, good luck with prevailing due to logic and fairness. A very good solution would be to have retailers collect the sales tax due in their home jurisdiction rather than what might be due in the purchaser's. That approach would foster tax competition while simplifying compliance costs.

Here's a 2009 interview with Patrick Byrne, the CEO and founder of Overstock.com, who remains the most vocal and principled opponent of internet sales tax legislation. The whole 10-minute interview is worth a listen (Byrne did a Ph.D dissertation at Stanford on Robert Nozick's libertarian philosophy), but the sales tax talk starts at 1.10 minutes:

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  1. The solution is to normalize the sales tax rate for all localities to 0%.

    1. The Libertarian Party wants something like 26%.

  2. Amazon is building a warehouse here in IL. So, hello 8.5% price increase.

    1. Welcome to my world. Though most of what I buy from Amazon is simply not stocked at local stores, and if it is, they’re so hard to find that the effort isn’t worth it.

      1. I was quite happy living outside your world.

    2. Yeah, that was sad news. They’ve already got warehouses just across the border in Indiana and Wisconsin, too.

  3. Yeah — one big reason I shop Amazon will be gone when they start collecting Ohio sales tax.

    1. Even with sales tax, the difference in sticker price for the same product can make the wait for delivery worthwhile to me.

      A particular component needed to install my car stereo was literally double the Amazon price when bought from a physical auto parts store. ($6 to $12). If I wasn’t already fed up at the project, I’d have waited for delivery.

  4. Yeah, winter is coming. Just not today.

  5. You’re still liable for the tax on stuff you buy online, only it’s called the use tax and you’re on your honor to remit it to the state yourself. PA recently put a line for it on our personal income tax form.

    So pay up, suckers.

    1. Who in their right mind enters a figure on that line other than “0”? Besides me, of course.

      1. I pay it. Yep, I’m a wuss.

        1. You guys can tell the truth, you know. The government isn’t wittingly watching.

          1. Sure, narc.

      2. The form offers a “suggested value” based on your income, so putting zero in is pretty much the “please audit me” schmuck button.

        1. Wow, we don’t have that in NY AFAIK. That’s pretty damn disgusting in fact. Don’t they have lower-hanging fruit to go after?

          1. Meh, in some sense being explictly told how much they want to leave you alone is refreshing.

          2. NY does, actually. There is a sales and use tax line on your resident return, and there is a suggested tax based on income. It’s below $100 for people with 200K income.

            I have never seen a single person audited for this, zero or not. The only danger is not putting a number in at all – this may be construed as an incomplete return which would leave you at risk for audit no matter how many years back the return was filed.

  6. at some point, it will happen. It is inevitable. This is potential revenue and these are elected officials. What politician has actually put forth a plan that would reduce, in true dollar terms, govt spending from one year to the next?

    A bill is talked about or introduced, that bill dies. Repeat a couple of times, add in a complacent public, and eventually, it passes as Chamber members give enough campaign cash in the name of ‘tax fairness’ or some such.

    1. I am frankly surprised it has gone on this long. The fact that it hasn’t happened yet makes me wonder if maybe it won’t ever. I know the politicians want the money. They always do. But what is going to change to make things different than they have been?

      1. But what is going to change to make things different than they have been?

        Every local government in bankruptcy?

        1. Every local level of government in bankruptcy?

          Fixed!

      2. one thing that may change is the party fo the president. A GOP Congress won’t do it with a Dem in the White House because it takes away the veneer of anti-tax cred. But Daddy Bush signed off on a tax hike not too long ago and it’s not impossible to believe another Repub won’t do likewise and couch it in some bullshit like the left did with O-care.

        1. “Read my lips – fuck you, that’s why!”

        2. Bush singed off on a tax increase forced on him by a Democratic Congress and over the revolt of his own party. Bush damn near got primaried by Buchanan as a result of that and lost his reelection bid after a large number of Republican voters defected to Perot.

          If you want to talk history, get it right. I would expect something like that from Tony not you.

      3. Depends on how much Amazon spends on lobbying.

        The budget can get money from anywhere and be as big as they want it to be. Having to ‘expend political capital’ (lose votes) to get this through could be more troublesome, especially if they’re being incentivized personally by Bezos and crew to go the other way.

        1. Amazon spends money lobbying FOR internet sales taxes. Fucks the smaller competition on compliance costs

      4. Nothing will change, but as much as I hate the progs, I have to give them credit for their persistence. They didn’t get democrat care passed the first time, but that sure as hell didn’t stop them.

  7. This is such a shake down. Every time I debate this issue with my prog relatives, I ask them why Amazon should pay sales tax in Minnesota if they don’t have any presence here. If their distribution center in Wisconsin catches on fire, will we send Minnesota fire trucks there to put it out? Or will our cops patrol their warehouse to make sure nothing is stolen?

    Isn’t that what local sales taxes are for? They pay for local services that all businesses consume.

    I know, I know this the economic FYTW. The pols have to wet their beak in order for them to bless the transaction.

    1. Amazon isn’t paying the sales tax. You are.

      The taxes are assessed on the individual making the purchase. The retailer acts only as the tax collector.

    2. Why do you hate Minnesota children?

  8. I will take being #37 for a change!

    KY keeps it low by not allowing counties/cities to add on an additional slaes tax.

  9. As long as city, county, and goofy tax districts with unusual boundaries (Texas and Colorado have a lot of these) exist, having online retailers collect taxes where they do not have nexus will be a nightmare for the retailer.

    Collecting the tax is only half the battle. At some point you have to fill out a tax return and send a check to the taxing jurisdiction.

    1. But Tulpa says it is easy!

  10. A very good solution would be to have retailers collect the sales tax due in their home jurisdiction rather than what might be due in the purchaser’s.

    They’ll just start shipping things directly from China (etc.). Which is fine by me.

  11. Oregon is at 0%? Surprised a state chock full of hipster progs allow that to continue.

  12. Can’t say I’m too outraged by this. Sales tax is one of the least harmful taxes and it should be collected from the consumer, the final buyer.

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