The Supreme Court ruled Thursday that states can have businesses collect sales tax on purchases even if that business has no physical presence in the state. This changes a rule that has been in place for decades.
Let's be clear what this means. Until now, a company that sold items on the internet but which has all its offices and warehouses in Connecticut was only required to collect sales tax from residents of that state. Now, that same company will have to collect taxes from nearly every other state.
The first effect of this ruling is that companies like Wayfair (the defendant in this case) can no sell at lower prices than other companies because they are using the internet and can avoid sales taxes. This will mean more taxes collected for the states, higher prices for consumers and fairer competition between competitors. Of course, a company like Wayfair will now have to collect fifty different state sales taxes and literally thousands of different local taxes. It will be a nightmare. Surely, there will have to be companies that develop computer programs that impose the correct sales tax on a transaction. This will cost money and will just add another level of expense onto the price of internet goods.
A friend of mine suggested today a possible fix. He suggests that Congress pass a law setting a sales tax on internet interstate sales at 5% (or something similar). The revenue received would than be distributed to each state proportionately with population. State sales taxes on interstate sales would otherwise be banned. This would mean that all internet sales would be hit with the same tax level. Millions or billions in extra costs could be avoided. States could avoid the expense of collecting the tax. The feds could even keep a piece of the collection sufficient to cover the cost of collection. It's a great solution.
Let's be clear what this means. Until now, a company that sold items on the internet but which has all its offices and warehouses in Connecticut was only required to collect sales tax from residents of that state. Now, that same company will have to collect taxes from nearly every other state.
The first effect of this ruling is that companies like Wayfair (the defendant in this case) can no sell at lower prices than other companies because they are using the internet and can avoid sales taxes. This will mean more taxes collected for the states, higher prices for consumers and fairer competition between competitors. Of course, a company like Wayfair will now have to collect fifty different state sales taxes and literally thousands of different local taxes. It will be a nightmare. Surely, there will have to be companies that develop computer programs that impose the correct sales tax on a transaction. This will cost money and will just add another level of expense onto the price of internet goods.
A friend of mine suggested today a possible fix. He suggests that Congress pass a law setting a sales tax on internet interstate sales at 5% (or something similar). The revenue received would than be distributed to each state proportionately with population. State sales taxes on interstate sales would otherwise be banned. This would mean that all internet sales would be hit with the same tax level. Millions or billions in extra costs could be avoided. States could avoid the expense of collecting the tax. The feds could even keep a piece of the collection sufficient to cover the cost of collection. It's a great solution.
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