Internet Sales Tax Hits Consumers Online
T. Elliot Gaiser /
Opposition is rising against the Marketplace Fairness Act, which would allow states to impose sales taxes on online sales.
Senator Max Baucus (D-MT), chairman of the Finance Committee, said it would violate the rights of citizens who choose to live in states without sales tax, like his home state of Montana. Senators Ron Wyden (D-OR) and Kelly Ayotte (R-NH) concur.
“This is a clear infringement on states’ rights that we cannot stand for,” Baucus said.
The bill would significantly increase the cost of buying goods on the Internet for consumers. It would allow politicians in Illinois to tax someone buying books from an online seller in New Hampshire, or make consumers in Ohio pay more to download songs from iTunes.
While many large corporations like Wal-Mart support increasing the taxes consumers pay for online products, companies like eBay have sent emails opposing the tax hike to people who sell goods through the online auction site.
“The legislation treats you and big multibillion-dollar online retailers, like Amazon, exactly the same,” John Donahoe, eBay’s chief executive, said in one email to eBay sellers.
Wayne Johnson, who runs a $2.5 million fly fishing eBay shop, said he would be forced to lay off most of his eight full-time employees in order to comply.
Senator Rand Paul (R-KY) said he opposes the bill for the same reason: It will destroy jobs and impose massive new costs on small businesses. He said in a Washington Times column:
At a time when businesses are already being strangled by job-destroying regulations, such as those imposed by Obamacare, the Internet Tax Mandate would add even more costs to our nation’s small businesses and job creators. The requirement to calculate sales-tax rates, much less collect those taxes, for each customer becomes even more burdensome when considering the various state, city and county sales taxes that will be imposed across the United States.
The burden on businesses would be immense and would skew the playing field against online businesses and online consumers. “This means quizzing purchasers about their location, looking up the appropriate rules and regulations in more than 9,600 taxing jurisdictions across the country, and then collecting and remitting sales tax for that distant authority,” writes Andrew Moylan, senior fellow with the R Street Institute. “No brick-and-mortar shop has to do this for in-store sales, and yet every online retailer would have to do it for remote sales.”
Ken Bentsen, acting president and chief executive officer of the Securities Industry and Financial Markets Association, said the bill will open the door to taxing financial transactions.
As Heritage President Jim DeMint wrote, “Overstock.com, eBay and the like could have to pay sales taxes to any state from which an Internet user placed an order, even if the company’s headquarters, warehouses and sales staff are located entirely in other states.”
“Small online sellers will therefore have to comply with tax laws created by distant governments in which they have no representation, and in places where they consume no local services,” writes The Wall Street Journal.
This is nothing short of “taxation without representation,” which DeMint opposed as a senator.
Lawmakers should reject attempts by states to grab money from citizens and companies in other states, and reject making online goods more expensive for consumers.