The other purposes consist mainly of raising tax revenues for state and local governments, and protecting brick-and-mortar retailers.
This “fairness” legislation, more accurately known as the Internet sales tax bill, passed the U.S. Senate on Monday. It would allow states to collect billions of dollars in sales taxes on Internet purchases by consumers in other states.
Every business with more than $1 million in annual online sales would have to collect the state sales taxes from customers and remit the money to the 46 states that impose sales taxes — a nightmare scenario for many small online businesses.
Under current law, a retailer must have a store, office or distribution center in a given state for that state to collect sales tax on Internet sales.
Thus, the major brick-and-mortar retailers operating nationwide collect taxes on Internet sales, but online retailers such as Amazon only collect sales taxes in states where they have offices or distribution centers.
That’s the issue with the supporters of tax-everything claiming that tax-free Internet sales are driving the brick-and-mortar retailers out of business.
It’s all about “fairness,” according to one of the bill’s sponsors, Republican Sen. Mike Enzi of Wyoming. “It’s about leveling the playing field for brick-and-mortar shops,” he said.
In fact, it would flat out level some online businesses, opponents say.
It would bring tons of compliance work and paperwork — “a huge, additional compliance nightmare that we’ve got to deal with,” said Kevin Hickey of Online Stores that has annual sales of $30 million but expects profits of only about $400,000 this year.
Hickey told CNN his Pennsylvania-based business would have to “be charging more, so we’ll lose revenue and have higher costs.”
Georgia Sens. Saxby Chambliss and Johnny Isakson both voted for the tax bill which passed 69-27. On a critical cloture motion April 25 to shut off debate and bring the bill to the floor, Chambliss voted no and Isakson voted yes in a very close 63-30 vote.
Four more negative votes would have blocked the bill. In the final vote, Republican senators split almost down the middle with 22 voting no along with five Democrats and 19 Republicans voting yes to pass the measure.
States have long been hungrily eyeing the prospect of taxing Internet sales that hit $226 billion last year in the United States, a 16 percent increase over 2011.
States “lost” $23 billion last year because they could not collect on out-of-state sales from the Internet, catalogs, mail orders and telephone orders, according to the National Conference of State Legislatures that supports the tax bill.
Consumers should have known this was coming. It was not a matter of if, but when. After all, it’s what they do best in Washington — tax people.