Jim DeMint: Online Sales Tax is Taxation Without Representation

About Jim DeMint:

Jim DeMint is a Republican senator from South Carolina.

States may already collect "use taxes" from residents who buy products from other states, online or otherwise, yet most rarely enforce them. So instead of raising taxes on their own voters, they want their allies in Washington to pass a new law that would allow state politicians to tax people who could never vote against them: out-of-state business owners.

Our nation was founded on the idea that a citizen has taxation with representation and the online sales tax on businesses destroys that tradition entirely.

[See a collection of political cartoons on the economy.]

If a bill such as the Marketplace Fairness Act became law, online businesses could be mandated to pay sales taxes to any state where they mail a product, even if it's a state in which neither the seller nor the buyer resides. So a retailer in the no-sales tax state of New Hampshire would be forced to pay California sales taxes every time they mailed a product to California, even if the buyer lived in Florida.

Brick and mortar stores have never been required to do anything like this. When a customer enters one of those stores, the shop owner only charges the same local and state sales tax at the register. Bizarrely, the Marketplace Fairness Act would require online retailers to keep track of more than 10,000 different mind-boggling state and local tax jurisdictions around the country.

The Marketplace Fairness Act's authors admit the costly burdens it would force on small businesses by exempting companies with less than $500,000 in annual sales. But that is a very low threshold to cross and will likely discourage businesses from growing. And, what happens if a small business owner makes a mistake calculating those taxes? They could suddenly be audited by numerous states where they have no political recourse.

[Read the U.S. News debate: Is a Flat Tax a Good Idea?]

So, who truly wants this legislation to pass? Not consumers who would pay more for goods. Certainly not small online retailers who can't afford armies of tech support staff and accountants to help them navigate these rules.

Those supporting this new Internet tax are the ones who stand to gain from it: politicians who want more taxes and large, national retailers who are already subject to multiple state taxes and see an opportunity to squeeze their online competition in the name of "fairness."

If states want more taxes, they can raise taxes on their residents, but it's antithetical to our federalist system to let states raise taxes on out-of-state residents.

Call this legislation what it is: A nationally-mandated Internet tax on small business. It's anything but fair.

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Jim DeMint,

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business