Level sales tax playing field
Business people who provide local jobs, pay local taxes and support local worthy causes are right to wonder why tax laws give their online competitors an advantage. But an effort to level the playing field is running afoul of a well-deserved suspicion about government’s motives.
Retailers who do much or most of their business on the Internet often do not have to charge customers state sales taxes. That can give them a pricing advantage over storefront businesses that are required to collect sales taxes. For example, because the sales tax on most goods sold in Minnesota is 6.875 percent (not including municipal sales taxes), that gives online companies selling to Minnesota residents a 6.875 percent price break.
Some states are attempting to collect sales taxes on Internet transactions involving their residents. But existing law makes that difficult unless the online retailer has a physical presence in a state.
U.S. senators have approved a bill that would make it easier for states to insist that online sellers collect sales taxes and forward them to customers’ states. Of course, the Internet community doesn’t like that. Complaints include the difficulty of processing sales taxes that vary in rates and other factors among the states.
Nonsense. If the online business community can figure out how to market, sell and ship products all over the world, it can solve the sales tax processing challenge.
But as matters stand, it may not come to that. Conservatives in the House of Representatives oppose the Senate bill – because it will result in tax increases in many states.
That may have governors and state legislators across the nation scratching their heads at the novel idea of Congress defending Americans against higher taxes.
Still, House conservatives have a point. In some states, enactment of the Senate bill would have the net effect of adding another tax burden.
But that is a matter for taxpayers in the states to handle – by making it clear to legislators and governors that, as nearly as practicable, the new taxing authority is to be handled in a revenue-neutral manner.
House conservatives are right to worry – but, again, the problem should be dealt with at the state level. Enacting the Senate bill would level the playing field somewhat between online sellers and merchants already required to collect sales taxes. In that light – of simple fairness – the bill ought to be enacted.