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Both Political Parties Salivating Over On Line Sales Taxes!

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Thursday, July 19th, 2012

Baton Rouge, Louisiana


You would think that in an election year, with anti-tax fervor at an all time high, our politicians at state and national levels would be adverse to mining every nook and cranny for more taxes.  Democrats, generally, are more willing than Republicans to hop on a new tax bandwagon. But now it looks like Republican governors, in a desperate attempt to send more revenue to state coffers, are quite willing to stick purchasers with sales taxes for whatever they buy online.

Back in 1992, the U.S. Supreme Court ruled that a state cannot charge an out-of-state company local and state sales taxes unless the company has a “physical presence” in that state.  It’s been called the “Amazon exemption” and no sales tax can be charged unless the out-of-state company opens up a distribution center, a warehouse, or some type of facility in the purchaser’s resident state.  However, the court decison gave congress the option of passing legislation that would give states the authority to tax such companies.

And that’s exactly what congress is now trying to do. The U.S. Senate is considering proposed legislation called the Marketplace Fairness Act that would give each state the authority to require “remote sellers” to collect sales tax on all sales, and follow the same procedure as are applied to in-state companies. This same concept has been floating around congress for years, but with strong Republican opposition. Since the Senate is democratically controlled, proponents are making a run to pass the new law this fall. Nothing new here. But now we have Republican governors, hungry to keep the home folks happy in a time of continuing budgetary shortfalls, ready to join the taxing parade.

Here’s how the Wall Street Journal sums up the changing attitude in this week’s lead front page story on the Republican tax increase cave in: “Republican governors, eager for new revenue to ease budget strains, are dropping their longtime opposition to imposing sales taxes on online purchases, a significant political shift that could soon bring an end to tax-free sales on the Internet.”Â  The Journal went on to detail the dramatic shift in the Republican view, even inferring the Louisiana Governor Bobby Jindal, who in the past has opposed even the hint of a tax increase or a renewal, might be changing his tune.

“The newfound support among Republicans is a dramatic change from just a few months ago. In February, at the Republican Governors Association meeting in Washington, one agenda item was online sales taxes. The reaction was decidedly cool then, with Louisiana Gov. Bobby Jindal worried that the effort sounded like a new tax, according to two attendees. Mr. Jindal’s office didn’t return a call seeking comment.”

Louisiana legislators joke that Jindal would oppose a tax on the devil himself. So when this die hard conservative opens up the door for internet sales taxes, you can assume a horde of Republicans are in the process of making an about-face.

Taxing on line purchases undermines the fairness of why sales taxes, or any taxes for that matter, are collected in the first place. These taxes are put into law for the purpose of funding a wide variety of government programs and services. The benefits accrue to the local taxpayer. A store owner who collects a sales tax gets something in return. There are police and fire protection, roads and other governmental services that benefit both buyer and seller.  Not so when a purchase is made on line. The internet seller derives no benefit from state and local government when such seller lives in another state.

It’s not that the internet seller is free from paying a variety of taxes. In their home state, they are assessed with income, property, sales, user fees, permit fees, and a variety of other taxes. And they get local and state governmental services in return. Yet Democrats and Republicans, alike, now want to impose an additional burden of making a company selling over the internet figure out the tax rate, not just in every state, but in every country, parish, city and local taxing  district in the country.

This writer has a small Louisiana based publishing company, which takes orders from states across the country. Under this new bipartisan taxing plan, my small business will now be forced to figure up the specific sales tax in every locality from wherever we might receive an order. Figuring out and applying this myriad of tax rates, in itself, is an additional unwarranted cost to the seller, which ultimately comes out of the consumer’s pocket as well. Nevermind the lack of fairness in the proposed “Market Fairness Act,” how smart is it to add another stress to small businesses in our already over-stressed economy?

There will be no such burden on in-state businesses.  Do you think your local laundry or gift shop, maybe located just a few blocks away, but in a different taxing district, will agree to obtain your address, determine the applicable tax for each customer, then collect the tax and send it into the state? Good luck!

The big guys like Amazon and Apple can handle these additional costs. In fact, Amazon is proposing charging a fee of 2.9% on its third-party vendors just to figure up what taxes need to be collected. So this would be even more costs piled on small businesses and their customers.

Some Republicans are even suggesting that the taxes be collected and remitted by the federal government. So much for states being the “laboratories of democracy” and protecting “states rights.”

Let me tell you just how far this new bipartisan tax mania has gone. The state of Illinois is now proposing that its own citizens will be taxed when they buy from out of state sellers.  So lets suppose an Illinois resident decides that he or she wants to send their own money out of state.  Under the proposed plan, they must pay a tax. No, let’s call it what it is ““ this is not a tax — this is outright confiscation.

States across the country are facing major financial crisis. But governors and legislatures have irresponsibily piled on unsustainable pension and other borrowing obligations. A tax on internet spending is simply a gimmick for the purpose of filling state and local coffers with no benefit to those paying and collecting such taxes.  Republicans and Democrats, alike, are caving in to the allure of new revenue. And we’re the big losers.


“Read my lips: no new taxes.”Â Â  George H.W. Bush


Peace and Justice

Jim Brown

Jim Brown’s syndicated column appears each week in numerous newspapers throughout the nation  and on websites worldwide.  You can read all his past columns and see continuing updates at www.jimbrownla.com.  You can also hear Jim’s nationally syndicated radio show each Sunday morning from 9 am till 11:00 am, central time, on the Genesis Radio Network, with a live stream at http://www.jimbrownla.com.




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