Internet sales were crazy on Cyber Monday and throughout the holiday season, as people took advantage of online shopping’s convenience and low prices. But what’s really crazy is Congress continuing to deny state and local governments the right to collect the tax on those sales that they so desperately need. And are due.
Congress’ refusal to act has meant the states have been operating under a 1992 Supreme Court decision that said catalog mail-order businesses could be required to collect sales tax from customers of a particular state only if they have a physical nexus to that state.
Some states, such as New York, have pushed the definition of nexus, as well as encouraged their residents to pay “use tax” on the goods and services they buy online. But with limited success, as evidenced by the estimated $23 billion in tax that is going uncollected nationwide.
So, at a time when the states need revenue more than ever, not only are they not getting it from Internet sales, they are taking in less overall because so much business is being conducted online. That, of course, means Main Street businesses are also suffering lost sales. And, unlike those retailers in who-knows-where, they pay property taxes (the primary means of funding local government), employ local people, sponsor Little League teams, etc. If they are forced to cut back or close, the whole community suffers.
This would not be a new tax, as congressional Republicans, who have been the most adamant opponents, suggest. It’s a tax that already exists, but some are allowed to avoid. There’s no free lunch, though. Someone has to pick up the cost of Congress’ gift to online retailers, and it is state and local taxpayers, who have to pay more of other taxes or see their services cut.
The nation’s governors, Republicans as well as Democrats, are lobbying lawmakers hard for the right to tax all online sales, and it’s time.