What's Fair About an Internet Sales Tax?

You have probably heard and/or seen the scuttlebutt about Congress trying to push through an Internet sales tax, ostensibly in order to level the playing field for brick and mortar businesses versus online businesses. You can be sure the effort has nothing to do with fairness and everything to do with politicians' insatiable appetite for tax money. They have been salivating over the possibility of reaping that new revenue source for years.

The plan is to require online sales from out-of-state buyers to have sales tax collected and remitted to the appropriate state revenue department. Local businesses are per the claim disadvantaged because they must collect their home state's sales tax, which supposedly causes buyers to prefer Internet vendors in order to avoid such taxes. As one who has purchased many items over the Internet in the last 15 years, I can't think of many times when avoiding sales tax was the prime motivation for my decision. It was usually because either the item I wanted was not available from a nearby store or the price was far better. Except for sellers like Amazon who offer free shipping on many items, most online businesses charge for shipping, which has gotten quite expensive in the last few years (along with everything else, BTW). Shipping costs can easily make a local purchase more advantageous. Many of larger retailers like Best Buy and Staples offer better prices online than in the local store, so most people go where the best overall deal can be had.

My home state, Pennsylvania, began a couple years ago requiring Amazon and some other online businesses to collect sales tax on residents' purchases, so there is clearly no advantage for me from a tax perspective. My motivation now is purely that of convenience and price. Most of what I order from Amazon arrives within two business days, even with the free shipping items, so why would I pay $40 for an inkjet color cartridge refill at the local Staples store when I can order it for $25-$30 online from Amazon with no shipping charge? The salespeople at Staples are nice, but I don't long for their companionship enough to pay more than I have to. I do still use their services, though, for making copies and printing out model airplane plans.

Since a large percentage of local businesses both large and small also operate online stores for making sales, they can sell to out-of-state customers without collecting sales tax. The businesses' state of residence still gets to collect income tax from the proprietor's net profits even if not the sales tax, but that's not enough. No amount of profit from someone else's labor is ever enough, remember. Without an ever-increasing supply of money and goodies to hand out to constituents (usually of low or no productivity), they lose power.

So, if the politicians, who of course are only looking out for the little guy, get their way and force every Internet sale to have tax collected on it, does that finally "level the playing field" for local businesses?

No, not at all.

Suppose their Platonic paradise of Internet taxing works out exactly as planned so that every online purchase made has tax collected and remitted to the buyer's home state. At that point the brick and mortar businesses have the advantage over out-of-state buyers because they are not required to determine a walk-in customer's state of origin and subsequently collect/remit the sales tax for/to that other state. It is quite common for residents of a state like Tennessee that has a 10% sales tax to drive to a neighboring state to pay only a 5%-7% sales tax. According to law the buyer is required to voluntarily pay the difference to Tennessee, but how often do you think that happens? Answer: Almost never.

If the Internet tax law is enacted, the next conquest of the benevolent lawmakers will be to correct the situation I just described. Then, at last, all the world will be right and our elected legislators will have earned their rightful places as kings and queens over the huddled masses (you and me) - gods so to speak, as rulers of yore considered themselves. Heretofore the People were still strong enough to resist their legislative manipulations and usurpations. The current majority of Sheeple don't have the fortitude, I'm ashamed to say They will keep quiet in order to assure their reliable supply of freebies, wantonly traded for personal freedom, are not interrupted.

Posted April 25, 2013