Editorial: Taxing Internet commerce is fair

Published Apr 25, 2013 at 05:00AM

A tax system should be fair. When it comes to sales tax and the Internet, some of the unfairness could be coming to an end.

Congress is likely to vote soon on a bill that would give states the authority to collect taxes on Internet purchases. The Washington Post reports that there may be as much as $11 billion in tax revenue a year that states are not getting.

The problem is this: State and local taxes are usually owed on purchases that are made online. They aren’t paid. Many online retailers don’t charge them. Consumers never pay them. Bricks and mortar stores complain that it puts them at a disadvantage.

Consider an example: A consumer can walk into a store in a state with a sales tax. The customer can figure out what he wants and then, while standing in the store, he can click “Buy it” from an online retailer on his phone to dodge the sales tax. It’s called “showrooming.”

The bill, called the Marketplace Fairness Act, intends to stop that.

The bill does have problems. There are some 9,600 taxing districts in the United States. To implement the bill, companies would have to develop or purchase software that would require constant updating every time a taxing district made a change. The bill does have an exemption that tries to protect smaller businesses from being overly burdened by the requirement. Basically, companies with out-of-state revenue of less than $1 million don’t have to comply.

Oregon Sen. Ron Wyden, a Democrat, is fighting the bill. He is concerned about the difficulty of compliance and he also sees the bill as setting a dangerous precedent. He says the bill endorses “the position that Internet entities — American businesses — should enforce laws that are outside their home jurisdiction. ... Today, the Senate may be considering taxation, but tomorrow it may be asked to consider similar schemes to enforce laws and regulations about content, speech, religion and other issues that are important powerful political interests.”

But Congress should vote on the bill that is before it — not on fear of a bill that does not exist. If in the future there are such schemes as Wyden fears, those should be voted down.

The Internet is where so much American commerce has shifted. It’s unfair to exempt it from taxation.