No New Taxes (... On The Rich)

I see that there is a bipartisan bill being floated in the Senate to require merchants with sales over $500K per year to collect sales tax on sales to other states, even though they have no physical presence in those states.

After years of trying to figure out how to force Internet companies to collect sales taxes on their purchases, Sen. Lamar Alexander (R-Tenn.) thinks he and a bipartisan group of senators finally have hit on the right solution.

Alexander joined Sens. Mike Enzi (R-Wyo.) and Dick Durbin (D-Ill.) on Wednesday to introduce federal legislation that would enable states to more easily collect sales taxes for online purchases made by their residents. They are among a group of 10 senators -- five Republicans and five Democrats -- co-sponsoring the Marketplace Fairness Act.

Lesson number... I lose track... in what the GOP "no new taxes" pledge really means. The story is a bit misleading as it has never been difficult to "force Internet companies to collect sales taxes", any more than it has been difficult to require retailers to collect taxes on their online or mail order sales for states in which the have a physical presence - which is to say, it's easy (for Congress).

The bill has drawn support from conservatives, including the American Conservative Union, because it leaves it up to each state to decide whether they want to collect the sales tax. And the nearly solid wall of opposition from online retailers has cracked, as Amazon.com Inc., the giant Internet retailer, has backed the proposed legislation.

States with sales taxes have already decided that they want to collect sales taxes. That's not a "conservative" basis for the bill - it's a transparent excuse for violating what is supposed to be an iron-clad pledge.

But all of that is to be expected. The more interesting part is reading that Amazon has now decided that it is better off collecting sales tax on its purchases than in continuing to fire state after state of affiliate marketers and to try to carve out exceptions to state law or structure its operations such that its many distribution centers don't count as a "physical presence" triggering sales tax. That is to say, the collection of sales tax has switched from being something that might make Amazon less competitive to something that might allow Amazon to exploit its vast size, impose costs upon its competitors, and create obstacles to entry for new online ventures. At this point Amazon might do well to partner with some major merchants or to otherwise establish physical pick-up locations in many states and cities, and from having Kindle stores and kiosks in shopping malls, which would put them in the position of having to collect sales tax anyway, so why not burn the bridge behind them in the name of being a "good corporate citizen"?

As this is "opt in", I would like to see as a condition for opting in the setting of a single state tax rate applicable to all out-of-state transactions shipping into the state, with all taxes payable to a single state agency, something that would make no difference for most states but would simplify the process for states that impose local sales taxes. I would also require states that opt in to make the process of obtaining a sales tax license both free and easy (no fees or bonds unless you have a physical presence in the state). Half a million dollars may sound like a lot of money, but a lot of Internet vendors operate on razor thin margins and don't need the burden of trying to figure out what local sales taxes apply, where they should be remitted, or to post bonds for sales tax licenses in states where they may only have a couple of transactions each year.