August 25, 2016 - 8:00 pm
Dangling other people’s money in front of government bureaucrats is like waving smack in front of a junkie. That’s why state and local governments advocate laws that will allow them to raid the evenue stream of internet commerce.
Thanks to a U.S. Supreme Court ruling, however, they’ve had only limited success.
Back in 1992, the justices ruled that retailers don’t have to collect sales taxes unless they have a brick-and-mortar presence in a state. That makes sense. Asking store owners — particularly those running mom-and-pop operations — to navigate the intricacies of sales tax law in all 50 states would be a tremendous and costly burden. Besides, retailers don’t use public services in places they choose not to locate.
But many merchants, particularly large ones with stores across they country, have long bellyached that the current law puts them at a disadvantage with online retailers. In addition, state and local jurisdictions complain they’re missing out on billions in potential taxes.
So in 2013, the Senate passed a measure that allows states to tax out-of-state sellers who ship goods to locations within their borders. The proposal has gone nowhere in the House.
But now comes Rep. Bob Goodlatte, a Virginia Republican who chairs the House Judiciary Committee. He seeks to tax internet sales “according to the tax base of the retailer and a single tax rate chosen by the consumer’s state,” the Wall Street Journal reports. This would allow state and local governments to capture revenue from every internet sale.
Rep. Goodlatte hopes his bill will serve as a compromise to the stalled Senate alternative. In fact, however, the proposal remains fraught with issues. Not only does it ignore the reality that the current law does indeed treat all sellers the same, it potentially runs afoul of the Commerce Clause while also imposing huge compliance issues on thousands of small businesses that have significant online operations.
Let’s call all this what it is: A money grab.
As Steve DelBianco, an advocate for online commerce, wrote recently in the Journal, “The Internet continues to sound a positive note for businesses. But proponents of new Internet taxes yearn to hear another noise: the sucking sound of e-retailers forced to vacuum lost coins from the sofas of their state’s consumers.”