Taxing online retail sales is only fair

Michael Mazerov

TEXT OF COMMENTARY

TESS VIGELAND: It's one of those small pleasures in life, not paying sales tax on some of the stuff you buy online. It usually happens if the site doesn't have any actual stores in the state you live in, but now New York is an exception. Online retailers must charge sales tax if they have affiliate marketing agreements with businesses in the state.

Amazon is suing, but commentator Michael Mazerov says Internet retailers should play by the same rules as the shop on the corner.


MICHAEL MAZEROV: One of the great things about shopping online is that you don't have to pay sales tax, right? Wrong. If your state taxes a shirt when you buy it in a store, then you're actually required to pay the same amount of tax directly to your state when you buy it on the Internet. Of course, most people don't do that, and many Internet retailers don't charge the tax because the Supreme Court has said they don't have to.

There are good reasons to change this, and require all Internet merchants to charge sales taxes. It has to do with fairness. If your local bookstore has to charge sales tax when Amazon doesn't, that puts the store at a competitive disadvantage, and this puts local jobs at risk.

Of course, you can avoid sales tax on Internet purchases only if you can afford a computer that links you to online retailers. The less well-off already pay a larger share of their income in sales taxes than those who are better-off, and a two-tiered system, that allows wealthier wired consumers to dodge sales taxes while poorer people continue to pay sales taxes in local stores, makes this imbalance worse.

Finally, states lose billions of dollars every year in sales taxes because of Internet shopping. As online retail grows, the lost revenue increases. This makes it harder for states and towns to hire police, fix the roads and improve the schools.

States have been pushing for a federal law to let them require all large Internet sellers to charge sales tax. Congress hasn't agreed to it because nobody wants to be accused of voting for a new tax. Some members also thought Internet commerce needed time to get on its feet without taxes, but the Internet isn't a toddler anymore, and these aren't new taxes. By requiring Internet businesses to collect the sales tax, we'd just be making them play by the same rules as the mom and pop store on Main Street. That only seems fair.


VIGELAND: Michael Mazerov is a senior fellow at the Center on Budget and Policy Priorities.

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