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Submitted: June 13, 2011 - 8:10am
Last updated: June 13, 2011 - 10:28am
Last updated: June 13, 2011 - 10:28am
Source:
Financial Times
Author:
Barney Jopson
Location:
Washington, DC, United States
Amazon and Ebay, two of the biggest names in online retail, have staked out contrary positions in a debate over the taxation of US Internet shopping, which enables many buyers to escape paying sales tax. The two companies are divided in the face of a lobbying challenge from bricks-and-mortar rivals including Walmart and Sears, which complain that a tax loophole gives their online rivals an unfair price advantage. The issue is being pushed up the political agenda by the weak public finances of many US states, which are struggling with budget deficits and are eager to find new sources of tax revenue. The US does not have a federal tax law on Internet commerce, but since 2008 seven states have changed their laws in an effort to make Amazon and others collect sales tax from customers. Amazon has fought such moves aggressively, but says it would support a federal law provided it was simple and applied even-handedly. Ebay, by contrast, remains a staunch opponent of any catch-all legislation. The controversy has implications for cash-strapped consumers, whose shift to tax-free online shopping was accelerated by the economic downturn.
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Comments
I'd tend to agree - eliminate sales taxes altogether, rather than try to chase down who bought what where. Because the next step is what to do about purchases made out-of-country.....
This issue has been with us for more than 100 years, since the introduction of mail order However, the volume of interstate retail sales is growing, so the sales tax loss is becoming more of an issue.
Many states have a Use Tax that their citizens are supposed to pay in lieu of sales tax on interstate purchases. However, compliance with this law is rare. It is, of course, difficult for the consumer to figure out how much he or she spent out of state come tax time. Interstate retailers could make it easier for consumers to comply with their state laws by sending a purchase summary at the end of each year. This should be pretty easy to do by email. States might even consider requiring interstate retailers in their state to send such a statement each year.
Enforcing one state's sales tax laws on a retailer in another state certainly creates jurisdiction problems. States might consider adding sales tax on all retail sales, including those shipping out of state. This, however, violates the commerce clause of the constitution. I largely see the purpose of this clause as an attempt at preventing import tariffs where one state would tax the products produced in another. That is not the case here... These would be more of "export tariffs." However, taxes are supposed to benefit the people who pay them. A Nevada resident paying a California sales tax does not benefit from that tax.
Perhaps the solution is to just get rid of sales taxes and make it up somewhere else. The money to buy stuff, which generates the sales tax, comes from personal income. Perhaps we could get rid of sales tax and compensate for the tax savings on the income tax. It would save us from trying to figure out if a snack is food (not taxable) or not (taxable).
Harold