EDITORIAL: Revenge of the nerds

The House must block the Senate’s Internet scam

Story Topics

Taxes aren’t high enough yet, so the U.S. Senate in its infinite wisdom is poised to raise them again. The innocuously titled Marketplace Fairness Act the worst legislation always carries an imaginatively phony title will sail through the upper chamber this week. If the House agrees, consumers will pay the guvvies more every time they shop on the Internet.

The bill’s premise is that by “streamlining” state sales-tax rules, online resellers will be better able to collect a “use tax” on goods sold through direct marketing (mail order, telephone or online sales) into a state where the merchant doesn’t have a store or warehouse. The muscle behind this comes from brick-and-mortar retailers who argue they’ve been losing business of customers who come in, examine products on their shelves and leave to buy them for less online.

If signed into law, this bit of “fairness” will effectively overturn the landmark 1992 U.S. Supreme Court case that blocked such remote taxation, Quill Corp. v. North Dakota. The justices ruled that firms that don’t have a “substantial nexus” in a given state aren’t required to collect sales (or “use”) taxes in that state. Perhaps it isn’t a coincidence that Jeff Bezos founded online retail giant Amazon.com two years after the Quill decision. Mr. Bezos created nearly 90,000 jobs; the “fairness” bill might well eliminate hundreds of thousands.

Amazon.com has already reached deals to collect sales or use taxes in those states where it has distribution warehouses or extensive data centers. That’s fair enough: The firm made its own decisions, and customers can choose to buy or not from Amazon. Forcing small merchants who sell via eBay or the Etsy online marketplace to do a state’s bidding when they have no presence in that state is merely greed.

Someone who makes handbags in Loudoun County, Va., for example, may never go to the Wyoming of Sen. Michael B. Enzi, the godfather of the fairness bill, or to the Tennessee of Sen. Lamar Alexander and the Illinois of Sen. Richard J. Durbin, both co-sponsors. Though the handbag maker, the potter and the artisan never use the roads, hospitals, schools, police or other services from those states, they’re required to become agents of Wyoming, Tennessee and Illinois.

Complying with the mandate is complicated and expensive, particularly for small businesses that will have to subject themselves to the revenue bureaucracies of 46 states, which will raise their costs without providing any benefit to its customers.

It’s all about big government scrounging more money to feed ever-larger bureaucracies. There is an obvious alternative: Stop spending so much. State and local governments could examine their budgets in the way every American family and every successful small business does: Cut waste, pull back, and do the things that create income. If Mr. Enzi’s Wyoming needs more state revenue, there are better ways of bringing the budget into balance without deputizing new “revenooers” in Florida.

The “use tax” is perhaps the most widely ignored tax on this side of the Atlantic, so dropping it would be wise. This is something House Speaker John A. Boehner and his team must stop, and quickly.

The Washington Times

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