Sen. Lamar Alexander and Sen. Mike Enzi, R-Wyo., have written a National Review op-ed piece on the Internet sales tax collection bill they are co-sponsoring. An excerpt:
You may be surprised to learn that, when you buy a TV online, you owe the same state sales tax that you would pay if you had purchased the TV at the appliance store on Main Street. Many online sellers don’t collect the state sales tax, and many purchasers don’t pay it, even though they owe it. This creates an online sales tax loophole.
Main Street retail stores are up in arms about the unfairness of this online sales tax loophole. As William F. Buckley Jr. wrote, “The mattress maker in Connecticut is willing to compete with the company in Massachusetts, but does not like it if out-of-state businesses are, in practical terms, subsidized; that’s what the non-tax amounts to. Local concerns are complaining about traffic in mattresses and books and records and computer equipment which, ordered through the Internet, come in, so to speak, duty free.”
Governors and legislators are up in arms, too. According to the National Conference of State Legislatures, next year this online sales tax loophole will cost states $23 billion in avoided taxes. For example, in Tennessee the maximum sales tax is 9.75 percent. Therefore, a $400 TV could be $39 cheaper purchased online than it would be on Main Street. Tennessee could use this lost sales-tax revenue to continue to avoid imposing a state income tax. Wyoming might use the revenue to lower its property-tax rates. Other states might use the lost revenue to reduce tuition at state colleges or to reward outstanding teaching.
…(T)en U.S. Senators are introducing today the Marketplace Fairness Act, bipartisan legislation offering states two ways to make it simple for online sellers to collect state sales taxes. Our proposal exempts online sellers with annual sales of less than $500,000 from collecting any tax at all. Our bill is a rarity for Washington, D.C.: It is only ten pages long.