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States get creative to tax online sales
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TEXT OF INTERVIEW
Steve Chiotakis: As the states scramble to close budget deficits this year, one revenue source has begun to pop up as an increasingly popular option: taxing online sales. But that's not an easy fix. Back in 1992, the Supreme Court said retailers that don't have a physical presence in a state cannot be forced to collect local sales taxes. That's costing states billions of dollars in lost revenue. Marketplace's Washington Bureau Chief, John Dimsdale, is with is live from D.C. this morning. Hi, John.
John Dimsdale: Good morning, Steve.
Chiotakis: So how are the states trying to circumvent that Supreme Court ruling?
Dimsdale: Well, they've got several different ideas. The latest effort by a couple of states is to argue that online retailers that advertise to shoppers in their state is the same thing as having a physical operation in that state, and therefore that marketer would have to collect and turn over to the state or local government the appropriate sales tax revenue.
Chiotakis: But there are different sales taxes in every state, and even cities. I mean, doesn't that make it really hard for companies to collect the appropriate tax?
Dimsdale: Exactly, that's the argument that online retailers make. You know, all sorts of variations -- some states charge taxes for groceries or clothing, others don't. So there's now a group of about 23 states trying to come up with a standardized set of tax rules that online sites could then use for everyone.
Chiotakis: And it seems, John, like the lack of sales taxes online gives these Web sites an advantage over traditional bricks and mortar stores, right?
Dimsdale: Yeah, that's true, and some states are trying to enlist lobbying support from those stores, because, arguing that hey, you're at a competitive disadvantage. But now, so many retail stores have online sites, they're less inclined to collect taxes. So states have to get more creative about ways to persuade e-commerce sites to level the playing field with the more traditional stores.
Chiotakis: Marketplace's John Dimsdale in Washington this morning. John, thanks.
Dimsdale: Thank you.
About the author
Steve Chiotakis was the host of Marketplace Morning Report until January 2012.
It sounds like States want to regulate commerce across state borders. Last I checked that's an explict power of the US Congress.
Only thing that would work is a National Sales Tax or a National VAT Tax distributed to the States as opposed to individual state sales taxes.
Good luck passing that. Given the state of Capitol Hill, they can't even agree on where to order lunch from.
The governments should be careful what they wish for. If they push taxes the online retailers will be at a competitive disadvantage because of taxes+shipping. You might skewer the online sellers in another state, but the other statey will in turn skewer your online retailers. We all lose in the end.
The basic premisis should be that taxes provide services that individuals cannot easily purchase on thier own (community stormwater manageemnt, for example). An individual running a business out of their garage or basement would require no more police, fire, or other public services than would be provided by the basic tax on their residence.
Other than raising revenue, there is no other justification for such a tax.
