Catesby Jones owns a small business in Virginia called Peace Frogs. Along with his three dozen employees, he makes T-shirts, baseball caps and other “cool” stuff, which he sells online.

He credits his success to the internet. “By reaching out to a worldwide base of customers, companies in rural parts like ours can thrive and have a much bigger presence than they otherwise would through traditional sales.”

Jones is incredibly concerned with the threat of the Internet Sales Tax. Big businesses with the money to lobby Congress are pushing for the measure, which they can afford to pay. But it would hurt small internet-based businesses like Peace Frogs.

Watch The Heritage Foundation video above to learn more about Catsby Jones’s story. Then tell us in the comments: do you think it’s fair for Congress to impose a punishing tax like this on Jones’ business?

Comments (58)

Joyce - June 6, 2013

Any Senator or Congressman/woman should be voted out of office if they say AYE on the tax. It’s taxation without representation. The tax will hurt all small businesses that are primarily online.

James Morgan - June 6, 2013

Simple. Declare the location of the business HQ to be the point of sale for Internet and catalog sales and charge the sales tax of the state containing the business.

Carl kieffer - June 6, 2013

Just another money grab!

RJ Schundler - June 6, 2013

State Sales tax need to be reformed …. So that if a small business ship out of state … and does not have an outlet in the state where the SB is shiping to, the local (where the company has an office) sales tax is paid …
The state has a vested interest in collection the sales tax, but a small business should not have to keep records of the sales tax rate in all 50 states. The rate that is charged should be the local rate where the goods were produced. Goods imported into the US, should pay the local rate where the goods were imported, unless the firm has an office in the state where the goods are sold.

Bart Brown - June 6, 2013

While I am sympathic to the issues raised in the video, my sense of fairness drives me to conclude that Internet sales without this law have a unique advantage over brick and mortor companies who are currently compelled to charge taxes. One could argue this creates an unfair playing field. On the other hand having to comply with all those tax structures is burdensome for the Internet company. Given the advances in computer software is there someway technology can lessen the burden on the small Internet company?

Tom Garden - June 6, 2013

Having. Lived in a rural area near the Smokey Mountains National park that was very remote with difficult roads isaw first hand why small towns are disapearing. Cottage industry was a partial answer but when the internet arrived it became a real force To tax this hope of survival would be a terrible example of government run amuck and only compound the difficulties oak business.

Carol Hile - June 6, 2013

In order to open a business we must pay the city for permits and taxes, the county get’s their share, the state their share and the Feds their piece…….then comes the overhead to run our business which includes payroll taxes to all of the above. As Main Street has closed its door’s to make way for Big Box Stores the Internet has been the saving grace to keep families going all over the country but that’s not enough to feed the greedy, they Demand more ……..When one “borrows” from the Mob they must pay the Vig but the small business person is not borrowing from anyone but the goverment want’s their Vig anyway……..or else…Whats the or else?

Ann Barnes - June 6, 2013

TOO Many taxes on everything. Encourage the small business people. No online taxes. The flat tax sounds encouraging for all of us.

The power to tax is the kind of power we don’t want.

Don Ernst - June 6, 2013

The government always has to be bought off, when will they look at small business’s and impact it does to them. To much money money etc.

Dan Draper - June 6, 2013

A change is required. Large firms (e.g. Amazon and others) selling via the internet are at a tax enabled unfair advantage when competing with locally operated firms with a physical site in the state where the sale takes place. Yet, it does not make sense to require 50 different sets of records (etc.) for a small firm. Either simplify the code with a common solution or exempt businesses below some threshold (which could be indexed with price inflation).

Mike Laughlin - June 6, 2013

Internet sales should pay state sales tax. If small businesses claim big internet sales businesses have an advantage … the small internet sales businesses also enjoy an advantage over the local brick and mortar business … because they don’t have to charge sales tax. Meanwhile, the local community suffers loss of revenue for essential services, and loss of jobs.

L. C. - June 6, 2013

It is another way for President Obama to hurt small businesses, he is trying to run American into the ground (a crisis) so he can implement more of his socialist agenda – a European type of governing. LCM 6/6/2013

Dr. J. Carbone - June 6, 2013

Government justifies internet sales tax arguing it is “fair,” taxing internet sales as it taxes brick and mortar sales. If tax comparability is the goal (rather than government greed), stop taxing both.

Don Merideth - June 6, 2013

This is just a grab by all levels of government to get more for their depleted coffers. If the brick and mortar stores really believe that online retailers not collecting sales taxes is to their disadvantage, the answer if for the various levels of government to lower or abolish the sales tax. Of course then the politicians would have less to spend on the government….that’s a problem?

A F McSwain - June 6, 2013

No, I do not think it’s fair for Congress to impose a punishing tax like this on Jones’ business. We need to boot out anyone who votes for this tax next election.

marie colombo - June 6, 2013

What next, Washington is out of control and they don’t care who they squash. They act like they can do no wrong and they don’t care who they hurt.

Ron Hinds - June 6, 2013

This bill is yet another example of big business (in this case Amazon, etc.) pulling up the ladder so that no one else can compete with them. It has nothing whatsoever to do with “fairness”!

Renee - June 6, 2013

Instead of looking for new ways and new avenues to tax us, our Congress needs to start cutting their budget. Most of Congress needs to go home and try to work for a living in the private sector. Most of them have never run a business.

Charles F Gotter - June 6, 2013

This attempt to put small business out of business is disgusting, even for the low-information Congress we are stuck with! Of course, they will make it so complicated that no one will understand it or how to comply so it will take lawyers and accountants help to finish us off. Many people are making a living using the internet who would have no income otherwise. Most people use the internet to purchase items they can’t find in brick & mortars because, quite frankly, they only cater to the standard item user. Another stupid income scam for an out of control government to waste giving it to some other country. There is no ‘fairness’ to it!

Dan Gordey - June 6, 2013

Forcing any business to know the exact amount of tax for every county in the USA goes beyond being reasonable. Add to that the book keeping expense and the expense of mailing quarterly checks to all these counties, many business will shut down. Could this be the real desired effect of our Congress?

Joan Hamblin - June 6, 2013

There absolutely should be no federal sales tax on small businesses that ship out of state. No federal sales tax period. Our federal budget is so bloated; why on earth should we encourage them (federal bureaucrats) to siphon any more of our money? If the Feds need money to pay for the ever expanding welfare rolls, we are on the wrong track. Let’s encourage these small businesses with no more taxes and then they can hire some of these people on welfare. And why should the states collect sales taxes on businesses out of their state? Sales tax, be it federal, state or local, should be to help pay services that the business/individual receives in that locale.

Duane Coleman - June 6, 2013

I believe the internet tax-free sales have been the culprit for much of the states’ deficits. Whether sales are conducted from a local storefront or from an internet site, all vendors need to be on a level playing field. However, I disagree with the plan put forth to submit the sales tax. There should be a set tax (e.g., 6%) that applies to all 50 states and the tax should be sent to a single state tax department. Then each state can allot each city’s tax collection based on the percentage they are already allotted.

Vic Johnson - June 6, 2013

This is another way to collect money from the working class citizens of america. It will in fact ruin a tremendous business opportunity for many individuals. Pick almost any other business and you are required to A) Have a store front B) pass zoning, local, state, and federal “codes” C) buy licenses, permits and go through countless approvals and inspections. Yet this is only the beginning of many hurdles required to start almost every other sort of in town business.

DeeDee - June 6, 2013

Our government is out of control. It’s a corrupt tyrant. The internet sales tax should be done away with and anything like this that hurts small business needs to be stopped. See what socialism has done for our country and people? Not good, is it? You fools who voted for Obama and the Democrats are all responsible for this disaster and misery.

Tyler Veth - June 6, 2013

While this may be burdensome to small family run Internet businesses its primary purpose is to curve the advantages enjoyed by the largest players on the Internet. These firms such as Amazon, EBay, Overstock, and assorted others are the reason why we have scene the decline of main st in the first place. These companies and others preform the majority of their sales online are at an extreme advantage when compared to brick and mortar stores which gave higher overhead and variable cost drivers. While I’m generally not in favor or any added taxation this seems only fair when comparing online and brick and mortar retailers.

David Eidelman - June 7, 2013

There are lots of small businesses that operate retail stores that have to charge their customers sales taxes, and it is totally unfair for an internet company, selling the same product, to not pay sales taxes. It’s pure and simple not an even playing field. This argument falls flat for me, and I think the Heritage Foundation is on the wrong side of this one. To me, it’s a no brainer.

Jacque Foreman - June 7, 2013

I have a small graphics business that I run out of my home in California and have since 1972. I pay sales tax on “tangible personal property.” If I sell a graphic over the internet, this is not taxed . . . yet. One of the problems I see forthcoming for this gentleman is, if he starts filing sales tax for “point of sale” only, his state will probably come after him saying he owes back sales tax and charge penalties. This is a very hard question. Fair can be defined in so many ways. I am certainly of the opinion that, if he pays sales tax, it should be for his “point of sales” — his state and municipality — ONLY. But, as someone who collects sales tax on some of what I sell, I can definitely see both sides of the issue.

Bob D - June 7, 2013

Just another nail in the coffin of small business. No more taxes. Curb government spending.

Joann Reitenour - June 7, 2013

Prevent a tax on internet sales!

Suzanne A. - June 7, 2013

No, it isn’t fair unless the company can charge the sales tax rate of the state where it is headquartered. Otherwise this is just another case of the federal government bullying small businesses.

Jim - June 7, 2013

Our politicians have no restraint in spending the funds generated by all taxes. This tax is just one more infringement on the taxpayers of this country. It would not matter how much revenue was generated by additional taxing, politicians will use the money for more pork and favorite handouts to their cronies. The blustering state and federal politicians can not be trusted with the mountain of cash they already blast their way through, so why add more fuel to that never ending waste pile of cash? Every time another tax is added, the government grows by a multitude of “jobs” created to spend that tax. More free loaders for the taxpayer to fund. It never ends!

Arthur Tunstall - June 7, 2013

This is an outrageous money grabbing effort that should be stopped right away.

Tom Rooney - June 7, 2013

This whole fight is actually a classic domestic example of what is called the “infant industries” protectionist argument in economics.Why is it that people can’t see that? The basic argument says that tax breaks “need” to be given to new industries to get them up and running. The problem is that when the industry gets up and running, they never let their tax break go. They’ll fight to keep it even the reason for its existence is gone. The whole reason *why* internet sales were exempted from in the first place was to give an incentive to online shoppers to try the new and unfamiliar phenomenon of buying things online — to help get internet shopping up and running. Does anyone really believe that online sales are still an infant industry? Then why continue to defend their tax break?

Jim - June 7, 2013

You are all wet on this one! What about all the small businesses that are at a competitive disadvantage because they have to withhold sales tax. THIS IS NOT A NEW TAX (which I would oppose), only a leveling of the playing field.

Robert Beaudoin - June 7, 2013

We are a small business in a small town. Our business has been impacted in no small part by internet sales. We can compete because we do in home services.People can shop our showroom feed on our expertise and the buy on the internet We can deal with this. but not the sales tax disadvantage

Dwight Bornemeier - June 7, 2013

Don’t tax them…. PERIOD

Bob Horacek - June 7, 2013

I have been a manufacturer’s representative for over 35 years and an internet sales tax is one of the most discriminatory taxes AGAINST small businesses that the Congress could enact. While the large, on-line retailers have $100’s of millions in sales over which to spread the costs of collecting the plethora of different state, county, and/or municipal taxes, the small retailer would be put out of business with those additional costs. IN NO WAY SHAPE OR MANNER SHOULD CONGRESS REQUIRE SMALL BUSINESSES TO COLLECT OUT OF STATE SALES TAXES.

Bob Gheen - June 7, 2013

The internet sellers have gotten a lot of attention “whining” about the internet sales tax bill. There are also large companies who are internet sellers as well, not just small entrepreneurs as you usually hear about. There is another side to this argument, which never seems to be explored or represented by Heritage. I am a small entrepreneur/businessman also, just like the millions of others across the country. The “brick and mortar” businesses, large and small, are required to collect sales tax. Sometimes this is not a standard rate, but multiple depending on the city and sometimes customer are not charged tax if for re-sale, etc.. In our industry, internet sellers are direct competitors and many times, the tax on a tool can be about $ 50, which becomes the deciding factor in a purchase decision. It’s not like “brick and mortar” entrepreneurs are exempt from the “burdensome regulations” imposed by government…..welcome to our world.
An example…..Tool sales are really low gross margin sales (internet sales are a big reason) sometimes 10% or less, so an 8.25% sales tax makes a sale at that price un-profitable, We welcome competition, but expect a level playing field. 8-10% price advantage is not a level playing field.
I understand the complexity of collecting tax in 50 different states, however, this is no reason for the government to give any type business a competitive advantage (subsidy). Also, technology makes recording multiple tax rates much easier and less expensive today. To me, this is fundamentally the same principle as exempting a certain set of Federal taxpayers(47%) If this is a fundamental belief of Heritage, I am extremely disappointed.
Plus, what about all the taxes that my state did not collect because of these sales….this increases the burden of the taxpayers in our state to “subsidize” the internet sales exemption for these companies. We have way too many examples already where our Federal Government is picking Winners and Losers and we should not make this another one.
I feel Heritage should use its resources to develop solutions to this problem considering ALL businesses, not just the internet sellers. I believe your constituency is probably comprised of more brick and mortar businesses than internet.

Don Morin - June 7, 2013

It isn’t fair for small businesses to have to pay a State Sales Tax. We’ve been getting the Short End of the stick since Mr Obama took office.

Dwight Boysen - June 7, 2013

I have mixed emotions about this bill. I understand the freedom of the market place. However, I live in rural SD and through my job travel Nebraska, Wyoming and Colorado. My clients continue to lose business to the internet because of no state sales tax. This in unfair. I understand the tax implications and if the internet it not to be taxed ( which I would prefer- the federal government does not have to get it the middle of it) then the business selling in that state should be requires just like those who do business other than the net should be required to collect the state tax or at least contact the state with the sale so the state can collect it. This bill as written is not a fix but just grows the federal government coffers and still leaves an unfair business place.

Judy Kildare - June 7, 2013

Internet sales tax is just plain WRONG. I agree that any “Congressperson” who votes for this tax should be voted out of office promptly.

Victress Jenkins - June 7, 2013

I agree with Joyce!! Let’s not stall our recovery now or anytime in the future!!!

Mike Alexander - June 7, 2013

Either congress needs to remove all sales tax from businesses or impose this tax on internet business. This is needed to get rid of the unfair advantage internet business have over the brick and mortar stores. I hate seeing my local Best Buy suffer because shoppers go to Amazon instead to save the tax. This is a real example of unfair!

Tommy Dodd - June 7, 2013

With the news that the Government is checking all the emails and sites maybe they will see this and know that I am against any new tax.

Dale Rogers - June 7, 2013

The Internet tax is wrong ! Once again it is greedy government taking money,for which they have done nothing, and bowing to big corporate lobbyist! We should stand for freedom of liberty and commerce as our founders did !
Dale Rogers
VIdor, Tx

Don Field - June 8, 2013

Of course the internet should not be taxed. Taxation is a method by political entities to control competition of favored supporters. If any politician votes in favor of the internet tax we the people must remove them from office by the ballot box.

Bill Schmidtgall - June 8, 2013

Internet companies already have an advantage over ‘real physical stores’ in that they lack investment in hard assets, pay property taxes, etc., but still use the services that those taxes, paid by others, provide.

Do we want all ‘real physical’ stores, where we can touch, get advice to vanish? Not me.

Louise Strauss - June 9, 2013

Once again the Congress proposes bills and are incapable of looking at the unintended consequences. People have to start electing representatives for ability not personality.

Neil Rodwell - June 9, 2013

Very few people wouldn’t wish a small company like Peace Frogs every success as it grows and employs folks in an area that doesn’t offer many obvious opportunities.
However, it isn’t just large companies that chafe about competition from enterprises that don’t pay local sales taxes – there are untold other small local business affected as well, some far more adversely than the Wal-Marts or Targets.
Far beyond the ability of most small internet businesses to stay on top of the tax laws of all jurisdictions into which they might occasionally sell. However, this presents the possibility of another business opportunity – a service that would easily calculate the correct local sales tax and look after remittance and reporting aspects of the process.
Am I a fan of sales taxes – absolutely not. But if you have them, they need to be applied uniformly.

Holly Chapo - June 9, 2013

NO!! It is neither fair nor sensible. Small businesses are the bedrock of our economy. Congress, that ever cowardly branch of government, needs to start cutting taxes of all kinds – especially the corporate tax and any that hit small businesses the hardest. Do we or do we not want a prosperous America?

Charlie - June 10, 2013

Fair today means what the majority thinks fair is. It has nothing to do with reality and specially with small businessmen who are trying to run a business.

A state sales tax is to tax sales made in the state. The point of sale for internet sales is not the state to which the goods are delivered.

As most have said, all governments have an insatiable desire and need for more money to run their liberal agendas. It will never end until we have a fundamental change in the core and character of Americans.

Mike Grattan - June 11, 2013

In fairness to brick & mortar retailers there should be a tax on sales by internet retailers, however, there should be one tax rate for each state which internet retailers should have no trouble dealing with. Each state should then be required to distribute taxes to sub taxing units as appropriate.

chuck rice - June 11, 2013

My business is new, it is just me and most of my customers are out of state with business done on the internet. How am I going to keep up with every sales tax entity in America? Right now it takes 20-30 minutes each time I do a Texas sales tax return. multiply that by 30 at this time and that is 15 hours a month just complying with sales tax returns – if all goes smoothly. I am a one man shop wanting to expand and hire people. How does that happen with this type of additional overhead?

Debra Putnam - June 12, 2013

THANK YOU, Dr. Carbone…
My first question and impulse. How about just doing away with all these taxes? A flat tax, or something simple and not burdensome. Just enough already with this mess of a tax code.

Karen - June 12, 2013

Well, there are two sides to a coin. While I don’t like the burden that government wants to put on small business, I also don’t think there is, currently, a fair playing field. My sister owns a small business in California and daily she loses business to internet sales. They have been in business for over 30 years, a small retail store. They have the unfortunate circumstance where people will come to them for their expertise, try their products and then go buy them from someone else on the internet, all because they don’t want to pay California sales tax (and some dealers of the product they sell ship for free). Granted, this isn’t the norm, but to lose even one sale a week is a big deal for a small business.

But, I don’t believe taxing the internet is the right answer, I’m just not sure what the answer is. Maybe the answer is a single LOW flat rate for all states and municipalities. But to require a small business to manage the sales tax records for all 50 states is doing a GREAT disservce to small business. I know for my sister’s company, she would have to hire a full time record keeper, which is a position they can’t afford.

Larry Smith - June 24, 2013

I, for one, do not make purchases over the internet for the purpose of avoiding sales tax. I use the internet to buy things that I cannot find locally. If I have to pay sales tax I will still buy over the internet. To take the burden off small business each state could have an ‘Internet Junction’ (for lack of a better term) through which all purchases for that state would have to pass. At the point of sale the tax portion would go directly to the state, a convenience for both seller and buyer.

Rayner Markley - July 10, 2013

A tax based on the location of the buyer would be better called a ‘purchasing tax’ rather than a sales tax. And I believe under the U.S. Constitution states may not tax goods coming into their state. Any such tax should be based on the location of the seller. That’s the way it works now with mail catalog sales; a business that advertises in another state or mails a catalog into another state doesn’t collect a sales tax for any state.

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