A movement started three years ago by Gov. Eliot Spitzer to make Internet retailers collect and remit sales taxes has picked up steam as states struggle for new ways to raise money without raising income taxes. This is generally good news, but in fairness to the e-tailers, the feds should address this issue once and for all.
States have lost billions of dollars in sales taxes to Internet companies, thanks to a 1992 Supreme Court ruling that freed businesses with no physical presence in a state from having to collect its sales taxes. The tax advantage of Internet shopping has also hurt traditional retailers, who generally have higher rent, property taxes, utilities and salaries than e-tailers.
The so-called Amazon Tax law championed by then-Gov. Spitzer got around the court ruling by declaring that even any e-tailer whose Website linked customers to an affiliate with a physical presence in the state was subject to taxation, and though a lawsuit is pending, the state has since collection hundreds of millions of dollars in sales tax on Internet sales. Several more states have passed similar laws, and more are about to follow suit.
The patchwork quilt effect is understandably difficult on e-tailers — forcing them to keep track of which states remain exempt and how much to charge customers in the states that aren’t.
That’s why the feds should take action. The old argument that the Internet was too new to expose to taxation, no longer applies.
Shopping on the Net is more convenient, and in many respects cheaper than patronizing real bricks-and-mortar merchants. That gives e-tailers an inherent advantage on their traditional counterparts.
The government doesn’t need to make the playing field even less level by continuing to give the e-tailers a tax advantage.