November 08, 2024
Editorial

ONLINE TAX TIME

A major step toward rational public policy was taken quietly last week. Several of the nation’s largest retailers began collecting taxes on their online sales.

For now, it’s voluntary and on as small a scale as anything can be that involves such giants as Wal-Mart, Target and Toys R Us. Before long, as Internet sales capture an increasingly large share of consumer spending, as states and localities wrestle with budget deficits and the loss of an important source of revenue, and as Congress is forced to address this issue without the gushing e-everything hyperbole, it will become huge.

No one, of course, enjoys paying taxes. The very least the public should expect from any tax system is fairness. A system in which one retailer can choose not to collect state and local sales taxes while another, offering identical goods and services, is compelled to collect is not fair.

Especially when that first retailer, operating somewhere in cyberspace and able to offer a taxpayer-subsidized discount, has no stake in the state or locality. The second, the one required by law to collect revenue on behalf of their state or locality, is the also the one that pays local property taxes, that provides local jobs, that supports the local Little League.

This issue, as it pertains to e-retail, now is more than a decade old. A 1992 Supreme Court decision prohibited states from exercising remote taxing authority because the sheer amount of discrepancy on what is taxed and for how much by the various levels of government throughout the country added up to some 7,500 confusing permutations, which the court correctly determined to be an unfair burden on remote retailers. Since then, the e-retail industry has shown itself to be, as a corporate citizen and employer, in no way superior to Main Street. The unfair burden issue has been effectively addressed by 38 states (including Maine) that have participated in the Streamlined Sales Tax Project to bring order to the confusion, and by cheap and easy-to-use software that allows even the smallest e-retailer to collect the appropriate tax.

In 2001, the state and local sales-tax loss to online retailers was $13.1 billion, up from $7.7 billion five years earlier. By 2006, the loss will triple to an estimated $45 billion; by 2011 it may reach $55 billion. States and localities cannot merely absorb this hit, so other taxes and the sales-tax rates go up.

The congressional moratorium on online sales taxes was first imposed in 1998, with lawmakers citing the Supreme Court’s “unfair burden” finding, and renewed last year without lawmakers recognizing the states’ effort, through the Streamlining Project, to ease it. Already, legislation has been introduced to make the moratorium a permanent ban; already, the sponsors are declaring their affection for the precious and special e-retailing industry. Perhaps this time they’ll they explain why they so dislike Main Street retailers and the state and local governments they support.


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