Tax E-Commerce Companies? Don't Do It

In case you missed John Sununu's column in The Boston Globe on the wrong-headedness of states taxing e-commerce companies -- and the sheer arrogance of giant predators like Walmart to demand it, check it out here.

And pay close attention, Florida.

Some of the Sunshine State's biggest guns are doing the big-boxer's bidding, promoting an Internet sales tax this legislative session.

According to Sununu, Walmart and others want to pass a law requiring e-commerce companies to collect taxes from consumers on the states' behalf.

"Rather than encumber a growing sector of our economy with an inefficient tax system, states should be searching for ways to streamline and simplify taxes," Sununu writes. He outlines the current system, in which online consumers are supposed to declare purchases to their home state, and argues that transferring this burdensome and complicated system to companies with no physical presence in the states is a bad solution that will create huge headaches for the companies.

"The idea that federal intervention is justified because the state isn't getting its fair share from Zappos shoe sales is a bridge too far," he says. "It’s not as though (states) have been denied ample mechanisms for reaching into the pockets of their citizens. Property taxes, excise taxes, business profit taxes, and personal income taxes allow states to collect from everyone who works, lives, or holds assets within their borders."

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Comments (3)

Equality for States
3:35AM OCT 27TH 2012
Each state has a choice whether or not they impose a sales tax. Those that impose a sales tax realize that charging that tax puts them at a disadvantage in interstate commerce.

Those states that choose not to impose a sales tax enjoy the benefits of that choice.

The current system is fair and protects states rights to chose their method of taxation.
David Campbell
4:47PM FEB 15TH 2012
Mr. Sununu's concerns regarding burden (the "huge headaches") are out-of-date, although directly inline with the Supreme Court's 1967 Bellas Hess ruling (which was the basis for its 1992 Quill ruling).

Mr. Sununu writes:
"Online firms will have dozens of new tax accounts to track and manage, each subject to its own burdens of audit and enforcement"

This does not need to be true. In fact, the Streamlined Sales Tax bills pending in Florida (SB.430 and H.321) actually modernize and simplify Florida's sales tax rules so that it will be extremely easy for online retailers to collect and remit Florida's sales tax. There is also legislation pending in Congress (S.1832 - the Marketplace Fairness Act) which recognizes that technology has advanced significantly since the 1967 Supreme Court ruled that keeping track of the many rates and exemptions would be too difficult.

In all seriousness, modern e-commerce companies keep track of millions of items for sale, serve customer targeted ads (based upon location, purchase preferences, and even browsing history), and even determine accurate shipping rates (varied by size, weight, and speed of delivery) - all in a blink of an eye - it is laughable to suggest these companies would be crushed by trying to keep track of a few thousand sales tax rates.

More importantly, if Florida's legislature (and Congress) continue to ignore this glaring inequality of treatment, they will effectively be encouraging Florida retailers to close-up shop and re-incorporate in Delaware and start selling purely online so they too can exploit this loophole to get a 7% price advantage over local retailers selling the exact same product to the exact same customer. It may not sound like much, but for businesses selling furniture, high-end electronics/computers, or home appliances, you couldn't blame them for doing this (even though the consumer still owes the tax).
Concervative Voice
1:02PM FEB 10TH 2012
I will bet you a steak dinner Scott will not sign the bill if it comes to his desk.

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