Has anyone ever heard the old cliché, “if it ain’t broke don’t fix it?” Evidently the United States Senate has not. The taxation of Internet sales is just another way of creating more taxes and stifling free enterprise but another way of providing more money to the states at the expense of the online business owner. Under the sales tax scheme, the Internet business that sells the product would have to collect the sales tax that would be imposed by the jurisdiction if the buyer purchased the product in the buyer’s home jurisdiction. This means that the burden to collect the sales tax would be on the Internet seller and then the seller would have to remit the sales tax to the state or jurisdiction where the purchaser resides.
Imposing a sales tax to be collected by the online seller does not equal the playing field as some proponents of the Internet tax promote. In fact, it would put the Internet company at a severe disadvantage. Here is my analysis. At the present time the Internet sales companies don’t have to worry about collecting sales tax. The responsibility of providing the “sales tax” to the individual states is at the purchaser level by way of a “use tax”. Simply put, a use tax is a tax imposed by the states for using the product in the state. Consequently, it is a self-compliant tax that is supposed to be paid to the state by the purchaser for the privilege of using the product in the state. It actually ends up being the equivalent of a sales tax. The state, in theory, ends up with the same amount of tax.
Imposing the collection of “sales tax” on the Internet seller creates a tremendous burden on the seller because the seller must keep track not only of the sales taxation rate of each state but also the sales tax rate of each county or township in each state. For example, in Florida the sales tax rates vary from county to county. For illustrative purposes, let’s say that each state has sixty-six counties or townships. Sixty-six times fifty states would require the Internet sellers to somehow keep track of three thousand three hundred different sales tax rates, an incredible burden. This creates such a burden on the Internet seller that many would simply go out of business or at least it would give the brick and mortar businesses a distinct advantage due to the fact that the brick and mortar businesses would only have to deal with one sales tax rate that would be determined by its physical location.
In our troubled economy in the US, we should be concerned about increasing business not putting companies out of business with unascertainable requirements. The bottom line is that the lazy state governments want to transfer the burden of collecting sales tax to the private sector which means more government regulation. Are the states willing to compensate the Internet sellers for this additional burden? I think not. This is another way that Big Brother is encroaching upon our individual and economic lives. If it ain’t broke don’t fix it!!!!
Andrew C. Moler, Esq.