President Obama yesterday endorsed a Senate bill that would allow states to tax online purchases. Under this proposal, anything you buy online would be subject to new state and local sales taxes based on where you live.
This would impose onerous new burdens on both consumers and companies that sell online. The Heritage Foundation’s T. Elliot Gaiser explains the plan’s consequences:
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.”
The plan amounts to “taxation without representation,” Heritage President Jim DeMint wrote last year. Under the proposed arrangement, business owners would be subject to taxes over which they have no say.
Heritage Foundation expert David Addington elaborates:
Take, for example, a company whose workforce and warehouses are in New Hampshire. This company has no contacts with Illinois other than taking remote sales orders over the Internet.
The Internet sales tax proposal would allow Illinois politicians to use the New Hampshire company as their tax collector. The New Hampshire company would have to collect Illinois sales tax on its remote sales to Illinois residents and send the taxes to the Illinois state government.
“‘Brick-and-mortar’ stores like Wal-Mart are in favor of the Internet sales tax, because they see these online retailers as competitors,” Heritage’s Amy Payne writes. “But the other big proponents of the tax are state governments, which would be able to reach into other states for revenue.”
The bottom line? This tax will benefit politicians and special interests while hurting consumers and small businesses who conduct business online.
Do you think the Internet sales tax is fair?