In 1992 the Supreme Court of the United States ruled that a business without a physical presence in a state should not be required to pay that state’s sales tax. In the last couple of years however, critics of that ruling have begun to make more of a push for most online retailers to pay state sales tax. This is all based on the pretense that nearly 20 years ago online sales were minimal and made little impact on a company’s bottom line. Besides the fact that many states have been chipping away at huge retailer Amazon.com, forcing them to pay taxes in states where affiliate marketers reside (which they promptly fire), there is a consensus forming in Congress to end what some see as a tax loophole.
Unfortunately, this is being brought about by cry baby members of the Retail Industry Leaders Association in the name of fairness. They state that it simply isn’t fair that online retailers don’t have to pay state taxes while customers come into brick and mortar retailers, use up a salesperson’s time inquiring about a product and then, sometimes right in front of the salesperson, order that product online via their mobile device. While it is certainly rude of anyone to be so blatant as to order right in front of the salesperson who just helped them, and it is a bummer for a physical location business to lose a sale such as this, there are really 2 issues going on here.
First, this kind of thing will still go on even if all online retailers are taxed, because exclusively online business will almost always sell at a lower price point than a brick and mortar establishment. Why? They simply have the ability to do business cheaper with much less overhead. Do you ever even think of the tax savings when purchasing online? Isn’t it usually the huge price difference that incites you to make a purchase via the web? Taxing a business to be fair in this instance is absurd because it will do nothing to curb the actions of people looking for a better deal. You might as well make it illegal to use the time of a retail location’s salesperson when you really aren’t intending to buy from them (I probably shouldn’t have given you socialist legislators reading this any ideas).
Secondly, rather than build an online presence or do better marketing to get more online sales, the whiny Retail Industry Leaders Association (RILA) and brick and mortar businesses want the government to step in and “level the playing field.” Below is directly from the RILA website:
“RILA also supports state action seeking to allow states collection authority by establishing nexus for online-only retailers through various means, or through direct state assessments of online-only retailers that have established facilities in a given state, as stop-gap measures until federal action to level the playing field can be enacted.”
Really? We have a completely out of control government in this country and in the name of fairness, you want to give them even more power? You want the federal government to make decisions for the states that are granted to them by the Constitution? Because brick and mortar retailers were not first or better at online marketing than companies like Amazon, they now demand that the playing field be leveled. Is anyone seeing the absurdity in this?
If you have never read Ayn Rand’s, Atlas Shrugged, this kind of leveling the playing field, cry baby stuff from misfit retailers and their industry organizations is a prophetic message right from the pages of Rand’s novel written some 50 years ago. Rand took the absurdities of this mode of thinking to its logical conclusion (which we are not far from these days) and her fictional society eventually destroyed itself. Do we not creep ever closer to that when we demand government action in the name of fairness?
While some see this as a big source of revenue for cash strapped states, it has hardly brought in but a trickle of revenue for states that have implemented an Internet sales tax. And if a national rule were to be implemented via a Congress that is in every aspect of our lives these days, that would impose an unfair burden on small business trying to comply with the multitude of different tax jurisdictions between states, counties and cities. While brick and mortar retailers would only have to be concerned about paying sales taxes in their local municipalities and or states, online retailers would have to be familiar with every tax law in every state, county and city. Mountains of paperwork would be required to comply with the laws of every state thus putting some online retailers out of business.
If there were even a chance of states being responsible with additional tax revenue, the idea of taxing online purchases might fly a little easier, but federal and local governments have proven over and over their complete incompetence when handling money that does not belong to them. States do not need more of our money. The more they take from us, the less we put back into the economy. Let’s keep out of state purchases tax free as they have always been.