Senate did the right thing–will the House?

by Linda Beale

Senate did the right thing–will the House?

Most are aware that online businesses have an unfair tax advantage. Under the 1992 Quill Supreme Court decision, states cannot currently require online retailers without physical presence in the state to collect applicable sales taxes. Although customers are supposed to save receipts and then pay over the appropriate amount of sales tax at the end of the year, nobody does. And they get away with not paying since it would be an onerous burden on states to assess those taxes without information from the onlines sellers. The result is that the tax-included price for merchandise purchased online is cheaper than for the same merchandise purchased in stores. So our tax system is essentially subsidizing the replacement of mom and pop small businesses with online giants. The mom and pop business often serves the online business in another way–for free: customers may go try on the merchandise at the local store, but then order online to get the cheaper (sales-tax-free) price.

Local businesses have lobbied for legislation that would permit states to require online retailers of reasonable size ($1 million in revenues annually) to collect sales taxes. Given the ability of today’s software to handle these kinds of complex tasks, there is really no justification for subsidizing online businesses over local businesses by not requiring them to collect the taxes.

The Senate finally passed the legislation on Monday. The vote–69-27–demonstrates that when politicians understand that people want a fair tax bill, they can sometimes even in this stridently partisan age manage to get it passed.

The House, however, may be another matter. Tea Party extremists are more likely to rally to the Norquist anti-tax pledge even though this is quite clearly NOT a tax bill. The taxes have long been due. It is the mechanism of collecting the taxes that the bill would change, since collection by the seller works much better than self-reporting and payment by the customer. Right-wing groups oppose the legislation as a matter of “basic principle because they are not only ideologically opposed to ANY revenue going to governments but also don’t like the idea of setting up reasonable measures to help government collect revenues actually due. Matt Kibbe of Freedom Works doesn’t like “creating a new infrastructure to expand the general power of government.”

Will the GOP leadership whip these guys into line. Probably not. Boehner has expressed his reluctance to support the legislation.

Funny, this is really a “state’s rights” issue that the GOP would, in ordinary times, likely support. It just ensures that states can collect sales taxes already due. And the GOP has tried to use sales taxes as an argument for eliminating the income tax–remember that one of the purported “pros” of a national sales tax that is claimed is that it could “piggyback” off the state sales tax mechanism, letting the states collect the federal sales tax. So the truth is now revealed. The GOP would be quite happy if the states were incapacitated to collect their own sales tax and thus unable to collect the ‘national’ sales tax either. The idea of starving government programs lies very shallowly beneath the surface of the opposition to this legislation.


ross posted with ataxingmatterl