Online Sales Tax Problem Is Resolving Itself
States already collect most online sales tax
August 8, 2012
Online and offline businesses currently collect sales taxes for every state where the business has a physical presence. If there's a Walmart anywhere in New York and a resident of that state buys a product online from Walmart.com, the Web site collects sales taxes for New York. The same goes for Amazon in New York, Texas, and California—and they'll collect for half the U.S. population by 2014.
New tax burdens will not save Main Street retailers challenged by big-box chains and Amazon. Consumers shop online for lower prices, better selection, and convenience—not to avoid paying sales tax, which is usually offset by shipping costs.
Legislative proposals like the Mainstreet Fairness Act will do more harm than good, especially when this problem is largely resolving itself. Today, 17 of the top 20 E-retailers—the big guys that are the biggest threat to local stores—already collect sales tax for more than 38 states.
But state tax collectors still want Congress to grant them authority to unleash a new and untested Internet tax system on businesses across the country.
The Supreme Court torpedoed this idea in 1992, citing the unreasonable cost and complexity for business owners. That prompted states to try establishing a simple and uniform sales tax system. But after a decade of trying, the states have failed to simplify collection and administrative burdens. So they're begging Congress to grant them new taxing powers now, whether it's simple or not.
Congress should not make that mistake, since it'll only encourage states to export more of their tax burdens.
States really want more tax revenue, but they won't find their pot of gold in a new Internet tax scheme. Uncaptured sales tax is less than one half of 1 percent of current state and local tax revenues.
If this new Internet tax system won't solve state budget woes and would cost small businesses 17 cents for every dollar they collect, who's pushing this idea?
Those giant brick-and-click retailers who'd like to raise costs for their rivals. Rest assured, none of the folks bankrolling this lobbying effort are losing sleep over the plight of America's small Main Street stores.