Indiana State Senator Luke Kenley recently asked Congress to help states collect sales tax on Internet purchases. This plan would force online retailers to collect taxes from out-of-state customers and then send that money back to the states. I see all sorts of problems with this, but what’s really interesting is that Congressman Mike Pence, currently running for Indiana’s Governor, threw his support behind it.
Pence has signed a pledge to never raise taxes, and this would appear to be raising taxes. So how does he justify this? According to the article at jconline.com:
Kenley and Pence both said that giving states authority to collect the tax through retailers should not be considered a tax increase since it’s already owed, just not being collected.
Ah, so this isn’t a tax increase because we already owe it, we just aren’t paying it. Interesting logic. I wonder if the Democrats have thought of using that one? Seems like a good argument to tax the rich like they’re always talking about. We’re not increasing your taxes, we’re just collecting the 90% you already owe to the rest of the public. So stop saying it’s an increase, it’s not, we just haven’t been collecting it.
Seriously?
Also in the article, Pence is quoted as saying:
”I don’t think Congress should be in the business of picking winners and losers . . . inaction by Congress today results in a system that does pick winners and losers.”
Tod Cohen of eBay Inc. had a spot on response:
“Sameness is not fairness. Small business retailers face many competitive disadvantages when compared to larger retailers,” Cohen said. “Do those who want a ‘level playing field’ demand that all small business retailers get the same tax credits, the same sales tax exclusions and the same shipping rates?”
It seems to me that the governmnet and Mr. Pence are in fact, picking the winners and losers.
So, I don’t claim to completely understand how this would work, and if any of our readers do, feel free to inform. If I’m a seller in Indiana, do I have to collect California sales tax for California buyers and then send the check to California? Or do I collect Indiana sales tax for California buyers and send that check to Indiana? Either way, tax rates aren’t equal across the states and I don’t want to do business where I pay higher taxes. So aside from Mr. Cohen’s common sense statement above, isn’t the very idea of this going to cause an inequality amongst retailers?
We live in a very interconnected world now and virtually everything can be bought and sold via the internet, from all over. This allows more flexibility and provides more choices to the consumer. It is essentially a haven for those people complaining that Wal-Mart killed the mom and pop shop, because on the internet, the small mom and pop shop actually CAN compete with the mega-companies. But if this online sales tax takes affect, it will be an all new campaign to run mom and pop out of business.
Mr. Pence, you ARE choosing the winners and losers, and I’m really not buying the “not a tax increase, just collecting what you already owe,” argument. It’s the weakest explanation I’ve ever heard and something I would fully expect to hear out of a liberal – not a conservative. If you suddenly have to pay more in taxes, where you once did not, that’s an increase. Are you also going to start collecting global warming taxes? Future stimulus taxes? The overweight tax? The help the Aardvark tax? Don’t worry, it’s not an increase, but you now owe 90% of everything you have. Ridiculous.
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I don’t see anything illogical about Pence’s position at all. The law is people have to pay sales tax on items they buy on-line. It’s called a use tax and you are supposed to pay it when you pay your income tax. Maybe 5% of the people do. There is probably 95% lack of compliance with the law. Because of this non-compliance, internet only sellers have about a 7% advantage over brick and mortar stores.
I agree with Pence that it’s not a tax increase. Now if you want to say that using this enforcement mechanism should be revenue neutral I think you’d have a point. We could eliminate another tax…I’d say the state inheritance tax would be a good one. It’s a worthless tax…raises very little revenue and can be very complicated to figure out. Or perhaps we could lower the income tax some, possibly even a 1/2 point off the sales tax.
So online have a 7% advantage? How about all that shipping costs? Like $15 on a music amp. THats a disadvantage. State laws end at the state line. Buy a car in ohio, pay the sales tax. Registar it in indiana, pay a nother sales tax.
Difference with Amazon is they have a physical presence in the state.
American’s For Tax Reform considers bills like Senator Kenley’s a tax increase and a violation of there no tax pledge. Nuf said.
Actually, ATR is neutral on this one, so far. An article in The Hill said “A spokesman for ATR said the group has not yet determined whether the proposals violate the group’s Taxpayer Protection Pledge.”
Well, considering Mr. Pence thinks the 4th amendment destroying “patriot” act is a good idea…I’m not surprised he wants to add yet another obstacle for businesses.
Here’s an idea you big government loving fascist….how about CUTTING SPENDING and forget about whatever revenue is “lost”.
And that “7% advantage” over brick and mortar stores is BULL Paul, and you know it…ever heard of SHIPPING?
Adding 7% to the cost and having to pay for shipping will bury many small internet start-ups.
Another win for big business……
I don’t disagree either. If you buy goods shipping to Indiana you pay IN sales tax, or you are supposed to. When I worked with a direct sales company (you know, the ones where you have home parties and place orders) we had to collect sales tax based on the customer’s state of residence. When I placed my orders, that tax was paid with the orders to home office (in my case, home office was in California). The company was responsible for making sure the states got their due sales tax.
And, no, the 7% advantage is not bull. Typically shipping cost is factored in to the items you are buying off the shelf in a brick and mortar.
So…I don’t believe this would be a tax increase but, would the cost to enforce collection be justified? That is another question.
While filling out my tax forms this year, I discovered Indiana DOES in fact require you to pay STATE sales tax on stuff such as online purchases.
The difference? Retailers with a physical location collect the sales tax and send it to the state. Online retailers mean the burden on paying the sales tax is on the citizen.
So the debate in Indiana isn’t so much “Should we collect it?” because that’s already law. The real decision is should retailers be required to collect it?
How much sales tax from out of state stores will just be pocketed. Who minding the stores?
That would be illegal – criminal even.
I would suggest that the retailer would collect their state’s tax no matter where the consumer’s residence they sell to . This would implement interstate competition for states to keep their sales tax as low as possible to keep these online retailers in their states. The purchaser should never be required to pay the sales tax directly to their own state for an out of state purchase. Buying from sates that have no sales tax? Well, those states will attract more online retailers, but will benefit less from them. In other words, If I buy from Florida online business, I would pay a Florida sales tax. Abolish property tax and all inheritance tax.
To understand the problem with this idea, one must first remember: Sales tax is local.
Our country was founded on the most basic concept of taxation with representation. That is why each state has its own House of Representatives and Senate—to ensure that there is local representation and a local voice regarding why, how much, and for what purpose you and your community will be taxed.
As suggested by Stymee, adoption of this origin-sourcing concept at a national scale would mean that if you bought something from an online store that charged you sales tax based upon where that online retailer is located, then you would be paying a sales tax you did not vote on.
Consider if you lived in California and bought a $1,100 LED TV from an online consumer electronics store based in New York City. Under the author’s plan, the NYC retailer would add 8.875% to the price of your TV ($97.63) and remit those proceeds to the retailer’s jurisdiction—New York City—not your California jurisdiction.
Under such a plan, you would be forced to pay a tax without any representation.
The plain fact is that technological advancements have been significant over the last 45 years (since the Supreme Court ruled in Bellas Hess v. North Dakota), or even the last 25 years (when the Supreme Court ruled in Quill v. Illinois, and invited Congress to weigh in on this issue at any time). Although the prospect of keeping track of every possible jurisdiction would have been unimaginable burdensome at those times, today there are software and service available for free over the internet for retailers to easily manage sales tax compliance for every jurisdiction in the country.
It is time for Congress to act, and Representative Pence should be commended for his integrity and leadership on this important issue.
If I get in my car and take the interstate over to Illinois and buy a product I pay Illinois sales tax. The same can be applied to the internet. I get on my computer and go to a store in Illinois (via the internet) and buy a product then I should pay Illinois sales tax. In either case I would be paying a tax that I didn’t have representation, but at no time would I be forced to pay this tax. I made a decision to buy the product and could have decided not to buy it or to buy it from somewhere else (unless it is healthcare of course). As Stymee points out “This would implement interstate competition for states to keep their sales tax as low as possible…” and this would also keep things simple for small business.
The “Internet Tax Policing Act of 2013″ is next. I can just see it! These tax fascists need to stop. @Jennifer – you had to collect tax because of the point of sale. If the point of sale does not happen in THAT State, then there isn’t a tax. Just like drive thru window sales, I can remember when window sales was not a point of sale taxable item. Just like the Democrat-Socialists that got that changed, Mike Pence is trying to change the point of sale definition of internet sales. Mike Pence IS a Democrat-Socialist in disguise, aka a RINO!
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