Senator Byron Dorgan of North Dakota is following up his Abramhoff scandal ties
with something that could make him even more unpopular: A plan to force collection
of state sales tax on internet sales. He is joined in his folly by Senator Enzi from Wyoming.
Follow below the fold to find out why I think this is bad for business and for consumers...
First of all, this would be a huge tax collection headache for small businesses. For example, if you make pottery in your back yard in Oregon, and sell it online, currently you would have to collect no sales tax, as there is no tax in Oregon. If this legislation passes, you would have to charge sales tax differently for every state, and then file quarterly tax reports separately with each state. Obviously, that's a huge hurdle, and one that would probably force quite a few entrepreneurs out of business.
Second, since this is based on the customer's location as the point of sale, rather than the seller's location, this would seem to require any business selling online to have a business license in every state to which they ship, another huge hurdle for small businesses who might not have the resources to pursue trademarks and other intellectual property in every state.
This just gets too complicated. What about a buyer in California, who orders a product from New York, to be shipped to Washington State as a gift? Do they pay NY, CA, WA, or all three?
I would prefer no sales tax at all on the Internet, but it's becoming too huge a cashcow for Congress to ignore. I think the only fair way to do this is the way we do it with brick/mortar stores. The company taking the order would pay state sales tax on every order based on the state in which they do business.
Buy a product from Amazon.com, you would pay Washington state sales tax. Buy a product from Musician's Friend, which is based in Oregon, you would pay no sales tax, regardless of where you order it from.
This would simplify things for retailers and for customers, and still provides revenue for the states.
Contact your senator and tell them you think that Enzi and Dorgan are making this way too complicated for small businesses.