The days of needing to protect the fledgling Internet are long gone, and online retail sales should be taxed the same as sales at local brick-and-mortar businesses.
So it was good that the U.S. Senate voted this week to authorize states to collect sales taxes for online purchases – though it was disappointing that Sen. Pat Roberts, R-Kan., was among the 27 senators who voted against it.
Now the House – and its members from Kansas – needs to approve the bill and level the playing field for retail businesses.
Stop picking winners and losers.
The Marketplace Fairness Act allows states to require out-of-state retailers to collect sales taxes when they sell products over the Internet, in catalogs, and through mail or telephone orders. Current law requires the businesses to collect taxes only if they have a physical presence in the state.
This sales-tax exemption creates a competitive disadvantage for local retailers and encourages consumers to buy from out-of-state companies. The exemption also is costly to states, which lost an estimated $23 billion in sales tax collections last year.
Opponents argue that collecting taxes is too complicated, given all the different state and local sales tax rates throughout the country. But states that want sales tax collected – and it would be their choice – must provide free computer software that calculates the tax. And the tax collections would be sent to one agency in each state, so retailers wouldn’t have to remit them to individual counties or cities.
Also, only businesses that have more than $1 million in out-of-state sales would be required to collect sales taxes. So this wouldn’t apply to many small businesses and start-up companies.
Roberts voted against the bill because he considers it a tax increase, but it really isn’t. Most states, including Kansas, already require their citizens to pay unpaid sales taxes when they file their state tax returns. It’s just that few comply and enforcement is next to impossible.
Sen. Jerry Moran, R-Kan., missed the vote this week because of a speaking commitment but supports the measure. He considers it a matter of tax fairness and local control.
“The legislation will not impose a new tax on the Internet or anyone,” Moran has said. “It will, however, protect small businesses and empower states with the ability to control fiscal policy as they see fit.”
The tax exemption might have made sense when Internet commerce was just getting going. But online sales in the United States totaled $226 billion last year, and it’s growing every year. It no longer needs special treatment.
For the editorial board, Phillip Brownlee