Big retailers, including Amazon, have been lobbying long and hard for it, and now the Internet sales tax is back after being quietly reintroduced in the US Senate last week.
The Marketplace and Internet Tax Fairness Act would force customers to pay sales taxes for online purchases from out-of-state online merchants, and it forces online retailers to collect and remit separately sales taxes to all US territories.
Washington Post says “Currently, officials can only levy sales taxes on retailers who have a physical presence, be it a store or warehouse, in their states.” Because of that, big box stores complain that Internet retailers have an unfair advantage. Congruently, local officials seem to be salivating at the potential for more revenue.
In March 2013, the Senate voted overwhelmingly 75-to-24 in favor of a largely symbolic version of this bill to gauge the support for the concept of Internet sales taxes. An identical bill was introduced in the House of Representatives last year only to expire in session without a vote.
Earlier this month, the House passed the Permanent Internet Tax Freedom Act which bans states from taxing Internet access. Being a fairly popular bill with the public, the Senate wants to hitch this sales tax bill to it in hopes of easier passage.
Critics say a tax will hurt the free decentralized Internet, customers will have to pay more, and most of all it will hurt small online businesses who can’t afford to comply with such complex accounting, which is no problem for big guys like Amazon. This is one way the big corporations in all industries use legislation to crowd out competition. It’s a new barrier to entry for start-ups and a new thorn for existing businesses.
Even foreign retailers (no matter where they are located) will have to charge, account for, and remit sales taxes for customers who may reside in a participating U.S. state. It doesn’t matter that the retailer has no attachment to the customer’s state, or country for that matter. Can anyone see how this may hinder the U.S. economy?
Proponents say the bill only applies to Internet retailers who gross over $1 million, which seems like a lot. However, former Congressman Ron Paul pointed out “many small Internet businesses with over a million dollars in out-of-state revenues operate on extremely thin profit margins, so even the slightest increase in expenses could put them out of businesses.”
Paul went on to question the constitutionality of the bill:
Some say that it is a legitimate exercise of Congress’s Commerce Clause power to give state governments the authority to force out-of-state businesses to collect sales taxes. But if that were the case, why shouldn’t state governments be able to force you to pay sales taxes where you physically cross state lines to make a purchase? The Commerce Clause was intended to facilitate the free flow of goods and services across state lines, not to help states impose new burdens on out of state businesses.
And Paul is backed up by the Illinois Supreme Court that ruled the Internet sales tax was unconstitutional:
This bill couldn’t be a better example of greedy politicians walking in lockstep with big business.It threatens the level playing field the Internet currently offers. It’s time to make some noise.
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