What’s in a name? That which we call a rose
By any other name would smell as sweet.
If truth in advertising laws applied to Congress, the so-called Main Street Fairness Act would be renamed as the Main Street Tax Act because it has absolutely nothing to do with fairness for main street. The unstated premise is that our current tax laws that treat online, out-of-state purchases different from offline purchases at bricks-and-mortar stores is unfair to Main Street businesses. However, the bill is all about collecting more sales tax and offers no help to Main Street businesses.
Congress makes the following findings:
(1) States should be encouraged to simplify their sales and use tax systems.
(2) As a matter of economic policy and basic fairness, similar sales transactions should be treated equally, without regard to the manner in which sales are transacted, whether in person, through the mail, over the telephone, on the Internet, or by other means.
(3) Congress may facilitate such equal taxation consistent with the United States Supreme Court’s decision in Quill Corp. v. North Dakota.
(4) States that voluntarily and adequately simplify their tax systems should be authorized to correct the present inequities in taxation through requiring sellers to collect taxes on sales of goods or services delivered in-state, without regard to the location of the seller.
(5) The States have experience, expertise, and a vital interest in the collection of sales and use taxes, and thus should take the lead in developing and implementing sales and use tax collection systems that are fair, efficient, and non-discriminatory in their application and that will simplify the process for both sellers and buyers.
(6) Online consumer privacy is of paramount importance to the growth of electronic commerce and must be protected.
You have to love Congress. Not sure how increasing taxes is fair to anyone but state governments, but there you go. Looking out for Main Street by hiking taxes.
5 replies on “Main Street Fairness Act”
Thank you the summary of findings. Good info. I don’t actually see that you make any point either for or against the bill. You gripe about taxes, but make no case for fairness or even for lower taxes. Yeah, I realize that’s what you think; I just don’t know why.
As for real analysis, my sense is that Main Street B&M is not at a complete disadvantage because of locally imposed taxes. Shipping on a per customer basis is probably more expensive than stocking goods, so Internet companies may be nearly even in costs without sales tax. That said, it is not the place of the government to correct for purely market based competitive advantages (unless there is something pernicious about certain players or outcomes in some market). The government will, however, have an interest in correcting for advantages that are due to the government itself, i.e. the uneven imposition of taxes.
You conclude by saying that a tax increase is not fair to anyone but state governments. That statement is an oxymoron. Being fair to the state government is fair to the state citizens, state workers, and state economy. States collect taxes for reasons that have to do with the lives of state residents. State revenues are way down, and while this may make small government advocates happy, a burgeoning deficit, an inability to conduct business, cutting off of money to productive / useful programs, and similar consequences are not somehow intrinsically “fair.”
In my opinion the bill is worrisome and I’ll need convincing to support it. But my concerns center on unemployment. A lot of unemployed people – some dating back to the dot com crash – are now small entrepreneurs online. I’m just worried about fiddling with the formula at all at this particular moment. The consequences might be more profound than the sponsors realize.
One last note the bill only affect about half the states in the country, because state support for standard practices for online taxation is a prerequisite.
1. This is not a tax increase. It is a bill to enable states to compel out of state sellers to collect taxes that in-state buyers already legally owe.
2. Buyers in many states are already required by law to pay sales or use taxes on goods purchased out of state–whether in person, via phone, via online, etc. Most buyers of course do not pay this so any action to force the collection of such taxes will be seen (inappropriately) as an increase.
3. The Supreme Court has ruled that “remote sellers” cannot be compelled by states to collect the sales/use tax. This bill aims to change that.
4. I agree that labeling this the “Fairness Act” and focusing on the supposed disadvantage that B&M have is dubious. I’m sure there are some out there that make purchasing decisions based on avoiding sales tax but I’d be willing to bet that other considerations far outweigh that one–base price of the item, shipping costs, time to deliver, etc. weigh far more heavily for me.
Several items have been left out of the previous discussions.
1. Internet based retail sales will continue to increase and the resulting loss of sales taxes will seriously impact state and local governments. A solution has to be found.
2. There are real costs associated with collecting taxes. Out-of-state retailers cannot be asked to carry this expense out of their own pocket.
3. How will enforcement work? Will E-Bay (for example) have to handle collection for their sellers or will some other agency deal with it? If it falls to individual states, the cost of administering the system will probably be a net loss for them.
This issue raises many more questions: How will non-profits be identified? Business to business transactions? Ugh
I couldn’t disagree with your findings more adamantly! As a small business owner, I am bombarded by requests to cut the equivalent of the states sales tax off of my prices because a person can get the same product online. This is simply unfair. Small businesses don’t ask for anything special, we only want an even chance to compete. The current laws stack the deck in favor of online warehouses that cheat the states out of revenue they rightfully deserve and give them an unfair advantage over any brick and mortar store. If I have to submit my sales tax revenues to the state, then any company should have to do so.
If an online store can handle paying FEDEX and UPS, then they can send out payments to individual states for the sales tax that is rightfully owed them. We are not talking about any extra charge or tax, but in fact taxes that rightfully owed when a purchase is made. The current situation is one that allows millions of consumers to cheat their own state. Real American of us I must say!
I need to know weather or not the money goes to the United States Federal Government.