Taxing Internet Purchases is a Bad Idea

We’re seeing more and more efforts to push for taxes to be collected on Internet purchases. Articles on this topic have been popping up all over the place lately (here, here, and here). The push makes sense in some minds. States with revenue issues need more revenue, and the Internet is the great untaxed frontier. (States with revenue issues more likely need a better fiscal policy more than they need added revenue, but that’s a huge topic for another post.)

You probably don’t have to wonder too much about whether or not I’d support the idea of taxing internet purchases. I’d oppose it primarily on the grounds that taxes are already too high, but there are other considerations as well. South Carolina’s Senator Jim DeMint addressed the issue recently and made the point that taxing Internet purchases would be unconstitutional:

Make no mistake: the online sales tax would be another unconstitutional mandate. If MFA [the Marketplace Fairness Act] becomes law, politicians in Washington would give California the right to force a business in another state to collect and pay California sales taxes.

And that’s just the beginning of DeMint’s problems with this idea. Concerns over interstate conflicts in tax collection, privacy issues, taxation without representation, regulatory costs, and the impact it would have on small businesses abound.

To make things even more frustrating, Amazon is getting on board with this concept. It’s all about fairness, right?

Well, not really.

What you may not know is that Amazon is beginning a push to be able to offer same-day delivery on orders. That means they would need distribution centers all over the country. To deliver same day to me in Atlanta, Amazon would have to have a distribution center nearby. By having that location in Georgia, they would have to collect tax on my purchases anyway.

So the big online giant supporting this effort to collect taxes in the name of fairness is, at best, misleading. Amazon sales will soon be subject to this type of taxation anyway, so forcing all online businesses to collect sales tax is in Amazon’s best interests. Amazon is looking out for number one, and consumers are not number one in Amazon’s book.

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