Monday, December 9, 2013
As Christmas rapidly approaches, folks are shopping bargains as they shop for presents.
Many look to the Internet for gift buying as products can often be purchased tax free — essentially an 8.9 percent discount for Walla Walla residents.
And while we all know life isn’t fair, tax policy is supposed to be.
Yet, this tax inequity continues. It’s unfair to brick-and-mortar retailers who do collect taxes and it hurts state and local governments. It’s estimated that more than $23 billion a year in tax collections is being lost through cyberspace sales.
To this point, Congress has approached the issue with timidity. But that could change soon.
The U.S. Supreme Court last week rejected a challenge to a New York state law requiring Internet companies to collect sales taxes.
The high courts move is expected to put some steam into energizing states to attempt to collect taxes due on online purchases made by their residents.
However, figuring out just how to collect sales taxes in a patchwork of 50 state laws is complex for the governments and frustrating for the merchants.
Given that, it’s critical Congress takes the lead. The issue has to be approached with the goal of achieving tax equity while taking care not creating myriad problems for online retailers.
Currently, states can require stores to collect sales taxes only if that store has a physical presence in the state. Few do. This gives Internet merchants an advantage over Main Street merchants competing for the business. The playing field should be level.
A proposal in the U.S. Senate has merit. It would exempt Internet business with less than $1 million a year in online sales from collecting taxes.
This would provide relief for those with small profits, but focus on the bigger players that do have the capacity to figure out sales tax distribution.
Now that a state law requiring Internet sales can be collected has been upheld, other states can move in that direction.
The system will only work if Congress establishes a framework that sets a national standard. This would allow the various state mandates to make the collection of sales taxes as fair as possible.