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FEULNER: Delete the Internet tax
States’ shortsighted cash grab will cost everyone
Question of the Day
Do you do at least some of your shopping online? If you're like most Americans, the answer is "yes." This leads to my next question: Would you like to pay more for the items you buy?
I'm guessing the answer is "no." But if Congress passes the Marketplace Fairness Act, you can expect to see your totals rise when you go to checkout with your online shopping cart.
The rule now, if you order from Amazon or any other website, is simple: Your items are taxed only if the retailer has a physical store or warehouse in the state where you live — a bricks-and-mortar presence, to use the industry lingo. If you live, say, in New York and you order from a retailer who is based entirely in California, you pay no sales tax.
That would change dramatically under the Marketplace Fairness Act. Every time you bought something online, you would be charged taxes you don't have to pay now.
It's worse if you are a merchant — and, let's face it, with the rise of sites such as eBay, nearly all of us are at one time or another. It's not just large retailers such as Amazon that would have to assess these taxes. Any retailer with more than $1 million in sales would have to collect sales taxes.
The relative simplicity of selling something online suddenly would get a lot more complicated. Sorting through the tax codes of 9,646 jurisdictions in the United States would be no easy task. At one per state, retailers would have to complete and file 46 state tax returns. Who wants to take a chance on making a tax-related mistake?
"How can we possibly know the tax rates in [those] jurisdictions?" said Overstock.com CEO Patrick Byrne. "In one jurisdiction, cotton candy is food; in another, it's entertainment or candy." Anyone who has ever tried to fill out a simple tax form knows how ludicrously complex it can get.
Etsy, an e-commerce hub where individuals can sell homemade items such as arts and crafts, has warned that the Marketplace Fairness Act would "unnecessarily burden small businesses. Most Etsy sellers work from home and don't have the administrative resources to comply with the law."
Advocates of an Internet tax say — as the title of the bill indicates — that the issue boils down to a matter of fairness. Why should bricks-and-mortar merchants, and not online retailers, have to pay the taxes in question?
Mr. Byrne has a pat answer for that: Backers of an Internet tax have it exactly backward. Internet merchants "put a lot lesser load on a local infrastructure" than Target, Wal-Mart or any other corporation with numerous physical stores. These companies, not the online retailers five states over, are the ones using the roads, sewers and schools.
"We don't impose nearly that load, so it isn't fair that we should have to pay those taxes," Mr. Byrne said.
Let's not forget how this law would force retailers to act as tax collectors for states in which they have no voice. So much for the classic American principle "No taxation without representation."
So who is pushing for an Internet tax? Cash-strapped states that are eyeing a windfall, for one. The big-box stores wouldn't mind seeing some of their online competitors disappear.
The fact that this measure would threaten a fragile economic recovery doesn't seem to faze either states or the big-box companies. They see only a quick way to add to their bottom line, fairness aside.
Their shortsighted solution, however, likely would harm everyone in the long run. It's time to permanently delete the Internet tax.
Ed Feulner is president of the Heritage Foundation (heritage.org).
© Copyright 2014 The Washington Times, LLC. Click here for reprint permission.
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