DeMint Demolishes the Internet Sales Tax

Wednesday, August 1st, 2012 and is filed under Blog, Taxes

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Although most Republicans are pretty dismal when it comes to issues related to downsizing government and cutting spending, they are good on taxes, right?


Republican Mike Enzi (Wyoming), along with 4 other Republicans has introduced a bill that would create the most unfair, cumbersome, and anti-growth tax which would ultimately lead to creation of a national sales tax.  S.1832, which is Orwellian named the Marketplace Fairness Act, would force E-Commerce websites to collect sales taxes from customers pursuant to the tax laws of the state of the purchaser.  In an effort to rectify the supposed unfair tax treatment of online stores as opposed to brick and mortar stores, this bill opens up a large can of worms and creates bigger problems.

Jim DeMint, writing in the Wall Street Journal, blows the lid of this ruse.


The Marketplace Fairness Act recently introduced in the Senate would require online retailers to collect and pay sales taxes to states where they have no physical presence or democratic recourse., eBay and the like could have to pay sales taxes to any state from which an Internet user placed an order, even if the company’s headquarters, warehouses and sales staff are located entirely in other states.

Such online sales tax proposals are taxation without representation. The proposed federal law tells businesses that there is no escape from the clutches of tax-hungry politicians. That concept is antithetical to our federalist system, which promotes competition among our states for the best economic policies.

Regulatory Nightmare/Anti-Growth

The burden on Internet entrepreneurs could be staggering. There are already nearly 10,000 state, local and municipal tax jurisdictions to navigate nationwide.

Just complying with a single state’s tax laws costs small businesses disproportionately more than larger firms that can afford accounting and technology teams to help them work through these arcane laws. A 2006 PricewaterhouseCoopers study found that tax-compliance costs for small businesses (those having $1 million to $10 million in annual sales) are nearly 2.5 times greater than those of larger firms. For businesses under $1 million in sales, those costs explode to 16 cents on every dollar of revenue.

And woe to online sellers if they have a dispute with one of the many states that will be unleashed to tax them. A small business owner in South Carolina could face simultaneous audits from California, New Jersey and Hawaii, with no political recourse.

Who would want to do business in this environment? That’s a problem that the Senate bill’s authors implicitly acknowledge, since they included an exemption for companies with less than $500,000 in annual sales. But that is a very low threshold to cross. Businesses will be discouraged from growing, encouraged to locate overseas, or even regulated out of business.

Will Lead to a National Sales Tax

At its core, this is a nationally mandated Internet sales tax on businesses. Once a single state demands these sales tax collections under the new law, businesses in every other state would be forced to comply with that state’s tax laws. Dozens of states are eagerly waiting to raise those taxes, as soon as Washington opens the floodgates. […]

Nor would these new Internet taxes satisfy tax-hungry politicians. Already Maryland Gov. Martin O’Malley, a Democrat, has called for a 6% tax on all downloads—music, movies, e-books and more—from vendors like iTunes. It probably wouldn’t be long before the burdens of complying with myriad state sales tax laws led to talk of a streamlined national sales tax to replace it, with Washington taking a cut and destroying our nation’s healthy tradition of state tax competition.