Dick Durbin's legislation could have unintended consequences on businesses. (Durbin/flickr)
By Lex Green
The Supreme Court decision Quill v. North Dakota says businesses cannot be forced to collect taxes for cities and states where they have no physical presence.
The burden is just too big. That ruling applied to catalogs in the pre-Internet age, and established an important principle of cross-state tax law. In February, Republican Senator Mike Enzi of Wyoming introduced a new Internet Sales Tax bill. A co-sponsor of the bill is Illinois Senator Dick Durbin. One of the co-sponsors of the House version is local Republican Aaron Schock.
This tax increase appeals to cities and cash strapped states like Illinois. But they also have the help of big businesses like Wal-Mart who can more easily absorb the costs of collection than can smaller competitors. The bill also is receiving support from Internet giant Amazon, who now sells a tax compliance service to other merchants.
The Marketplace Fairness Act discriminates against Internet-based businesses by imposing burdens that does not apply to brick-and-mortar companies. Online merchants will be forced to collect sales taxes for all of America’s estimated 9,600 state and local taxing authorities.
New Hampshire has no sales tax, but a Web merchant there would be forced to collect sales taxes for all the governments that do. Online sellers will have to deal with tax laws created by governments in which they have no representation, and where they consume no services. However, New Hampshire’s in-state retailers will not be required to collect taxes on the many customers who drive across the state borders to shop. Bill sponsors like Representative Schock say its’ too much trouble to force retailers to ask every customer where they live, but these politicians are happy to grab the easy money from online taxes.
This bill cannot force international sellers to collect such a tax, so instead of driving business back to Main Street, we could just as well see online purchases go to overseas companies. That is what we call unintended consequences.
Lex Green was born in Bloomington and graduated from Bloomington High School. He is married to Karen and has three grown children. His family has roots in McLean County dating back to the 1820s. He ran for Governor of Illinois in 2010 as a Libertarian and Mayor of Bloomington in 2013. Lex currently works at Mitsubishi Motors in Normal.
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