#2: Internet Sales Tax

What’s so iAWFUL?

Despite losing year after year, the tax collectors continue to try to force small businesses to collect sales tax for what could be 10,000 local jurisdictions, and file returns with 46 states.  That means small businesses – in other words, your neighbor – that are trying to make a living will drown in red tape.

(US S698)

The renewed threat of federal legislation (MFA) would give new tax and audit powers to state tax collectors, threatening online businesses everywhere.   Internet sales tax forces online sellers to calculate and collect for over 10,000 tax jurisdictions.  Who’s the winner if MFA passes? Big box stores and certified sales tax software providers (CSP) – in fact one CSP extolled the fact that once MFA is passed they can expect a windfall of up to $1.5 billion a year!

We’ve spoken before about the absurdity of MFA, but it is basically this:

Imagine if the cashiers handling your Black Friday checkouts asked to see your driver’s license so they could look up sales tax rates and rules for the town where you live, then file returns and face tax audits from every state where their customers reside. That sounds crazy, but it’s exactly what MFA would require for any business that sells through a catalog or website.

And if you think that state tax collectors are going to limit themselves to taxing goods, think again – they’re going after online services and digital downloads next.

While some legislators continue to introduce and reintroduce the same flawed approach, other legislators, like Chairman Bob Goodlatte, have adapted existing sales tax laws for the 21st century with his Online Sales Simplification Act (OSSA).

Legislators, like Chairman Bob Goodlatte, have adapted existing sales tax laws for the 21st century with his Online Sales Simplification Act.

Under OSSA, the scenario of showing your driver’s license at checkout doesn’t apply. OSSA says that whether you travel to a store by plane, train, car, or internet, that store collects the same rate – their home rate. But for online sales, rather than the money staying in the home state, the store sends that money back to the customer’s home state.

This is true fairness – equality – and tax competition between states. It simply applies our legacy sales tax laws to this new online medium. Most importantly, it doesn’t require jury-rigging of tax codes, business infrastructures, or giving handouts to private tax software companies.

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The iAWFUL reflects the editorial views of the Executive Director of NetChoice and does not necessarily reflect the views of all NetChoice members.

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