Marketplace Scratch Pad

Internet sales tax coming?

Scott Jagow Apr 22, 2009

Somehow I missed this story a couple days ago, but Congressional lawmakers are about to introduce bills that would eliminate the “brick and mortar” requirement for collecting Internet sales taxes.

From Businessweek:

If a bill passes — and that’s a big “if” — it would require all online retailers, except for the tiniest companies, to collect sales taxes in the 23 states that are part of the Streamlined Sales Tax Project.

Right now, for example, Amazon is only required to collect taxes in states where it has a “physical presence,” like Washington state. The National Conference of State Legislatures is pushing to get this bill through Congress. Obviously, most states have budget holes, and they’re turning over every rock to find new revenue. But there’s certain to be resistance in Congress to what will look like a tax increase. I dare say most people aren’t voluntarily paying their Internet taxes now.

The NCSL says several big states like California, Florida and Texas that aren’t part of the Streamlined Sales Tax Project are considering joining. But…

That said, efforts in several states have fizzled. New York’s governor, for instance, has recently tried to tax iPod downloads, such as music and movies. The provision didn’t make it into the state’s final budget, approved two weeks ago. In Minnesota, a bill designed to tax digital content such as music and ringtones was, in early April, introduced in the House, but it appears to be stuck in the Senate. “There’s clear opposition from the IT industry,” says Minnesota Rep. Jim Davnie. “Apple, Microsoft have been in my office.”

I’m sure an internet sales tax is coming at some point, like it or not. But considering the economic climate, I find it hard to believe that time is now. It’s tricky. The only way I see it working is as a flat federal tax or as a simple tax agreed to by all 50 states. Half of them trying to “streamline” the taxation process isn’t going to cut it. It’s too much of a burden on small Internet companies to keep up with the different tax policies of all these states.

And in a time when the federal government wants to encourage consumer spending, I don’t see this getting through Congress.

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