The Tennessean, April 28, 2013
In the Internet stone-age, the mid-1990s, Congress acted to encourage innovation and foster the development of the World Wide Web with policies designed to ease the regulatory burden on what is essentially a borderless business. One of the most effective policies in that encouragement was a moratorium on the requirement for businesses to collect and remit sales taxes on items purchased over the Internet.
That policy, more than any other government action, created a new category of business, e-commerce companies. Amazon, eBay and hundreds of other businesses emerged and invested billions of dollars to build vast, efficient, integrated and complex systems and solutions.
Fifteen years have passed and the U.S. Senate is poised to remove the sales tax collection exemption. This week Sen. Lamar Alexander joined the sponsors in a news conference to promote the bill, named Marketplace Fairness Act of 2013, which would allow states and localities to impose sales taxes on Internet transactions based on the residence of the purchaser, not the physical location of the seller.
The push for the bill is illustrated by two announcements from large retailers this week: Amazon reported that its first-quarter revenue rose 22 percent, to $16.07 billion; Wal-Mart, whose sales are mostly in stores, is expecting no sales growth at all this quarter.
“It’s beyond frustrating that Congress waited until Amazon became so dominant that having a massive tax advantage is no longer essential to its strategy,” Stacy Mitchell, a senior researcher with the Institute for Local Self-Reliance told The New York Times this week. “The right time to fix this was a decade ago, when it could have saved many local businesses.”
Whether it is too late or not, Alexander said it must be done. “If somebody from Ohio or Illinois wants to sell in Tennessee, they need to play by the same rules everybody in Tennessee has to play by — the governor and legislature of Tennessee ought to be able to decide that,” the two-term senator said in a Senate floor speech last week.
I must say that the logic of the anti-tax position eludes me. That position is that if I go online to order an item from a merchant in my town and have it mailed to me I should pay Tennessee and Davidson County sales tax, but if I chose to go online and order the same item from a company in Atlanta then I owe no taxes to any government.
That logic ignores the fact that I do owe something called use tax, as the Tennessee Department of Revenue website points out: “Tennessee, like other states that impose a sales tax, also taxes the use of property that is brought into the state untaxed when purchased. The purpose of the use tax is not only to raise revenue, but also to protect local merchants.”
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