Internet Sales Tax Won’t Happen in Lame-Duck Session, But Should It Ever?

Well, this is encouraging.

A bill granting states the ability to force out-of-state
websites to collect Internet sales tax is dead, according to the
Ohio Republican’s spokesman.

“The speaker has made clear in the past he has significant
concerns about the bill, and it won’t move forward this year,” said
spokesman Kevin Smith. “The Judiciary Committee continues to
examine the measure and the broader issue. In the meantime, the
House and Senate should work together to extend the moratorium on
internet taxation without further delay.”

A bipartisan group passed the Marketplace Fairness Act out of
the Senate last year on a 69-27 vote, led by Sens. Richard J.
Durbin, D-Ill., and Michael B. Enzi, R-Wyo., but it has languished
in the House.

More here.

Hat Tip: Generation
Opportunity.

As it stands, internet
retailers generally don’t collect sales tax on purchases sent to
states in which the retailer has no physical presence. So, for
instance, my Amazon purchases sent to my home in Ohio are
gloriously cheaper than ones sent to
23 other states.

It’s a certainty that at some point internet retailers will be
forced to collect state and local sales taxes on all sales,
regardless of physical presence. That’s partly because lawmakers
will eventually demand it—there’s just too much untaxed money out
there and expecting pols not to pounce on it is like expecting a
dog to ignore a pile of hamburger meat that’s right under its
snoot. It’s also partily because giant retailers such as Walmart
will demand it in the name of a “level playing field” between
bricks-and-mortar ops and mail-order companies. Indeed, after many
years of opposing levying of sales tax on all purchases,
even Amazon has been playing along, partly because it can
absorb the extra costs more efficiently than smaller online
retailers. 

There are strong arguments against forcing internet retailers
from collecting such taxes (see below), but realpolitik
being what it is, good luck with prevailing due to logic and
fairness. A very good solution would be to have retailers collect
the sales tax due in their home jurisdiction rather than what might
be due in the purchaser’s.
That approach would foster tax competition while simplifying
compliance costs.

Here’s a 2009 interview with Patrick Byrne, the CEO and founder
of Overstock.com, who remains the most vocal and principled
opponent of internet sales tax legislation. The whole 10-minute
interview is worth a listen (Byrne did a Ph.D dissertation at
Stanford on Robert Nozick’s libertarian philosophy), but the sales
tax talk starts at 1.10 minutes: