I try my hardest to stay away from political discussions on this blog for many sound reasons. One sure way to lose friends and become influential to nobody is to spew your beliefs without keeping an open mind about how others may think or feel. That plus I truly believe most of the time discussions about politics inevitably devolve into something akin to an alligator trying to swallow a porcupine: nobody is going to like the outcome. So I’m breaking a personal rule to write about an issue firmly rooted in the political discussion of the day—the Internet Tax Fairness Act. I think you can gather by my headline that I’m dead set against it. So are the Republicans, thank goodness. But on the off chance that it rears its ugly head again, here are my reasons for opposing it…
What Is It?
If you haven’t heard, the US Congress has been trying to pass what has been disingenuously called the ‘Internet Tax Fairness Act,’ for a while now. The main thrust comes from big box stores who are upset that online retailers have been operating on the internet tax free while they have had to collect sales taxes from customers buying products in their brick and mortar stores. On its face it sounds fair. Why should they have to collect taxes when online retailers do not? This is especially egregious for the big box stores because they say they’ve seen evidence that shoppers are increasingly buying from the internet solely to avoid paying taxes. I say it’s not about lost revenue. It’s about large corporate interests trying to gain control over one of the last frontiers of commerce that is still relatively free from such oppression.
What Would The Law Do?
The act, if made law, would require online retailers to comply with thousands of tax jurisdictions, putting them at a distinct disadvantage when compared to a brick and mortar store which would only have to deal with one. If an online business in Colorado gets an order from a customer in Seattle, Albuquerque, and Little Rock, it will be forced to collect and remit sales taxes for all three cities and all three states. I can tell you it gets even trickier than that. Some cities have several different tax zones, and if you don’t know which one you are selling to, it can mean a large fine when the IRS caches wind of your mistake.
It’s enough to make small online retailers shake in our boots. Yes, there are provisions in the law that exempt smaller companies from this tax, but only if they do less than one million dollars of business online. However, money coming in and out does not equal profits. Even large stores like Ebay have razor thin profit margins, so Ebay will be negatively affected right along with the rest of us.
Experts estimate that each business affected by this law will have to spend somewhere from $20,000 to $300,000 in software integration and training to comply. Where do you think they will be going to make up for that loss? You guessed it, the customers. Additionally, it is estimated that we will lose over 200,000 jobs in the first year this bill becomes law due to companies downsizing in order to make up for the huge expenditures.
Sales Tax is Repugnant
Finally, I just had to say this: being from Oregon, I simply don’t understand sales taxes. No. It goes even further than that. I abhor sales tax. Oregon is one of only two states in the country without a sales tax and I can tell you without a doubt I thank God for that every time I go to the store (we must be doing something right, ranked 2nd in overall tax fairness). The bottom line is that sales tax is a tax on the poor. It hits everyone and forces everyone to pay even if they cannot. Taxing food is a crime in my book. It’s like taxing air, which probably is coming if Congress has its way. Sure, in Oregon we have a higher than normal property tax, but that’s a much more equitable tax. People who own property are inherently more able to pay the higher taxes. I’m a landowner and have no problem paying property taxes. What I can’t stand is trying to calculate taxes in my head to make sure I can afford something when I went to the store with exactly five dollars in my pocket.
One of the solutions put forth would be to implement an overall federal internet sales tax. It would make the process much simpler, but it still doesn’t change the fact that it’s a new tax. Do we really need new taxes?
Basically, we have two groups of people who will be negatively affected by an internet sales tax, 1. Customers who are already cash strapped in this sluggish economy, and 2. Small businesses that can barely keep the lights on let alone buy expensive tax software or hire on new employees just to handle their tax liabilities. To me, there is nothing fair about this proposed internet tax law. In my opinion, we need to keep the internet tax free.
Sources: nrf.com | pcworld.com | azcentral.com | wallethub.com