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The (Online) Taxman Cometh

If the Main Street Fairness Act passes Congress, your ebooks smorgasbord will come with a side of sales tax. The growing fight between web retailers and the various states who want to collect sales taxes has caught the attention of Congress.

Online purchases fall into a carefully created crack in the tax code. Buyers need to pay sales tax, but there’s no easy way to collect it from them, so sellers are required to do so. But if a seller doesn’t operate in a given state, it doesn’t have to collect the tax for that state.

This disconnect between collecting and paying sales tax has long been known, but it was left in place to support and nurture a fledgling industry. That was a good idea for when the web was just getting started, but do you really think Amazon still need the protection?

With a new bill before Congress, this might change. The Main Street Fairness Act was originally proposed in July 2010, but it doesn’t appear to have gone anywhere. But the bill seems to have resurfaced this year in the wake of the fighting between Amazon and Texas, Amazon and Illinois, and Amazon and Tennessee. (TBF, it’s not just Amazon; they’re just the most visible because they’re the largest.)

Of course, this new law might have one interesting side effect. It could push more people to buy from overseas, where they might not have to pay the sales tax.

image by Paul-W

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Comments


Chris 16 June, 2011 um 11:59 am

Really? Taxes cause people, who can, to do business elsewhere? The hell you say.


Lorraine 16 June, 2011 um 1:28 pm

Classic economic idiocy. When you want less of something, you tax it.

So Congress is saying they want less online purchasing but that doesn’t necessarily translate to more Main Street purchasing.

The free market works best if government gets out of the way.

It’s too bad we don’t have a Congress full of economists instead of lawyers.

Chris 16 June, 2011 um 3:31 pm

True, but if we did, they’d likely be Keynesians, so we’d still be hosed.

Brent 16 June, 2011 um 3:31 pm

Amen.


Brent 16 June, 2011 um 3:07 pm

The Amazon and Illinois issue didn’t go so well for that states affiliates like FatWallet.com. We made a video of our company moving to Wisconsin 30 days after the law passed in March. So far, we’re good with being cheeseheads.
http://www.youtube.com/watch?v=ckP0HWl_w3c


Olympia Press 16 June, 2011 um 4:01 pm

Ya think that’s bad. Online sellers of anything are looking at 28% withholding starting next year. It’s part of Dodd & Frank, and quite fair, given the role most of us played in the mortgage crisis.

/Seriously trying to move operations to Belize.

Chris 16 June, 2011 um 8:57 pm

The role Dodd & Frank played should come with jail time.


Jeremy Davis 1 July, 2011 um 11:25 am

So I just saw this. One other issue… Many companies have to have permission to operate in a state. So a construction company in MO has to pay and have a license to build in TN or TX. Will the same have to occur for web based systems?

Nate Hoffelder 1 July, 2011 um 11:27 am

Some do, yes.

For example, money transfer services often need to have a license from each state they operate in.


Magnum Serpentine 21 August, 2011 um 2:07 am

United States Supreme Court said all taxes on the internet are illegal. So, I wonder why the States are being allowed to tax the internet?


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