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 Editorials | Opinions | July 2005 
Internet Sales Taxes
 NYTimes
Thirteen years is a long time to get a pass. A 1992 Supreme Court decision has exempted Internet retailers from the obligation to collect most sales taxes on the grounds that it would be unduly burdensome. Back then, the country's thousands of state and local taxing jurisdictions all had differing rules.
But times have changed, and the law of the land should, too. Last week, 18 state tax collectors met in Chicago to announce an interstate agreement establishing uniform sales tax rules. Starting in October, the group will offer free software that will allow any business to easily collect the required taxes online.
The states' demonstration project will drive home the point that online sales-tax collection can be done nationwide. Many retailers already collect the taxes. Now Congress should step up and pass a law overturning the court's exemption in states that have streamlined their tax systems. That would allow hard-pressed states to take in roughly $20 billion a year in annual sales tax revenue that is rightfully theirs, and perhaps much more, depending on the growth in online shopping. It would also help level the playing field between local and online retailers.
No one in Congress has proposed legislation yet, but Senator Byron Dorgan, a North Dakota Democrat, and Senator Michael Enzi, a Wyoming Republican, are working on the issue. Still, anti-taxers are already grousing. Among their complaints is that collecting sales taxes online would represent a tax increase, which they oppose on principle. That's disingenuous. Online sales have always been taxable. But it's impossible for states to collect any sales tax directly from shoppers unless the shoppers voluntarily send in the tax. For the tax to be enforceable, it must be collected by retailers.
A related objection is that federal legislation should not be used to resolve a state-tax issue. That's totally off the point. The only way to address the Supreme Court ruling is for Congress to pass a federal law.
As if sensing the hollowness of those arguments, Web merchants are already gearing up for the day when they'll be required to collect sales tax. The New York Times reported last week that eBay and Amazon were duking it out over the level of online sales at which tax collection should apply. An eBay spokesman quoted in the article said businesses selling "in the range of $5 million" should be exempt from any collection obligation. Noting that a company doing $5 million in online sales is hardly a mom-and-pop, Amazon says that if there is an exemption, it should be much more limited. We don't see why any business should be exempt.
Lawmakers should not become distracted. Sales tax collection by online retailers is an idea whose time is way overdue. |
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