Following on Monday's Online Tax Holiday May Be Ending Soon, there is a nice story today at CNET (Tax-free Internet shopping may be at an end). The story is interesting insofar as it provides some insight into the strategy online companies will be taking to defeat the proposal.
"The states are desperate for new revenue and I think they realize they're straying far from the simplification they originally promised," said Steve DelBianco, executive director of NetChoice, an online industry association, is quoted as saying. "That creates an urgency on their part--to get the federal mandate before it becomes clear they have no intention to simplify." Later: "They have no real intention of simplifying or compensating sellers for the burdens of collecting."
This may be a winning argument with legislators who are philosophically opposed to taxation, or with legislators from tech-sector states. But for the rest of Congress, the online industry is going to have to make a better argument than that. State legislators have no reason not to simplify and harmonize their sales tax systems; they have been working toward this goal for nearly a decade. I would be surprised if the ontological conundrums ("Are Thin Mints a food or candy?") that vexed circa 2003 politicians cannot be readily solved by the brilliant, cash-strapped legislative minds in Washington today.
Nor are states the desperate party here. The desperation (if indeed there is any) belongs to the people who are dependent on state governments for basic public services, health care, and maintenance income. Would it really be a burden to program online payment systems to calculate, collect, and transmit state sales taxes?
Also, sales taxes for online purchases are already a legal obligation in most states. What we are talking about here is whether or not online businesses (and other remote sellers) are going to assist states in collecting taxes that are already lawfully due. Congress can't stop itself from taxing. But it can stop the states from taxing. That's ironic, at least.
Possibly Related Tidbit: Where is President Obama, the guy who wrote a $855,323 check to the IRS yesterday, on this? His new Secretary of Commerce, Gary Locke, was a member of the Advisory Commission on Electronic Commerce, a contentious, 19-member group of government and business leaders charged with the task of making recommendations to Congress on e-commerce tax policy back in 1999-2000. Locke, who at the time was governor of Washington state, believed that the commission should not take positions that would remove a major source of revenue for funding the basic civil services that states and localities provide. He said then that, while he was not an advocate of hampering the electronic commerce industry, he believed the commission should not make recommendations “awarding” a tax advantage to the online industry. He worried that declining sales tax revenues could endanger education funding, noting that Washington state received 48 percent of its revenue from the sales tax. It would be “ironic,” he said, if the growth of electronic commerce, driven by highly skilled professionals, led to a decline in the quality of education.
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