Today’s Wall Street Journal features a full-page debate (p.B5) on whether retailers should be forced to collect sales tax for all states — even where the business has no physical presence.
The article includes a debate between Michael Mazerov, who wants force all online sellers to collect taxes for all states, versus my argument in favor of the present national standard established by the Constitution and Supreme Court rulings.
Take a few minutes to compare the arguments. And if you agree that the physical presence rule is the best way to preserve e-commerce as an opportunity for small businesses, please vote in the WSJ online poll. (this morning’s printed poll results came over the last several weeks — before this debate was published ).
If the WSJ editors had given me just a bit more room, I’d have added this rebuttal to the “fairness” claim made by proponents of new tax collection rules:
To really make things “fair” between retail stores and web stores, we’d need to force all retail stores to change their checkout process to match what online sellers have to do now:
The clerk at the cash register would ask customers to present a drivers license or some other proof of the state and town where they live.
The clerk would have to look-up the tax rate for the item being purchased, using the definitions adopted by the state and town of residence. If the customer is purchasing a granola bar, for instance, it’ll be taxed as food in some states while others will tax it as candy.
Before entering the tax rate, the clerk has to determine whether the customer’s tax jurisdiction was currently exempting all or a portion of their item from sales tax, as part of a “sales tax holiday”.
Then the clerk can enter the tax rate and ring-out the customer.
At which point the accountants in the back office will have to record the sale for filing of returns and remittances to each customer’s home tax jurisdiction.
Sounds fairly ridiculous, doesn’t it? But the process described above is exactly what online and catalog sellers presently do when making a sale into their home state or any other state where they have a physical presence.
Of course, it’s not fair to force traditional retail stores to collect sales tax this way. Just like it’s not fair to force online retailers to collect for up to 9,400 tax jurisdictions where they have no presence.
The fairest policy is the one set forth in our Constitution and Supreme Court rulings: every retailer should collect wherever it has a physical presence.
Note: Not all NetChoice members share the views expressed here.
- Should States Require Online Retailers to Collect Sales Tax? (online.wsj.com)
- The Taxman Doth Protest Too Much (netchoice.org)
- Odd Timing to Promote “Fairness” (netchoice.org)