On the heels of several other articles by other major papers, Randall Stoss wrote a seething article in the New York Times about how Amazon should be required to collect sales tax (quite noticeably the article didn’t point out or suggest that any other Internet retailers should).
This is yet another article about how Amazon.com should be collecting sales tax, even when most other retailers are not. Another curious aspect of this particular article: Why does it bother the Old Gray Lady in New York, since Amazon.com is already collecting and remitting sales tax from consumers in New York (though they are understandably not pleased about it).
In our view, the media is putting alot of effort behind a recent report (“Amazon’s Arguments Against Collecting Sales Taxes Do Not Withstand Scrutiny“) published November 16, 2009 by Mr. Michael Mazerov of the “Center on Budget and Policy Priorities.” Mr. Mazerov is not new to the issues of Internet sales tax matters, having articulated many aspects of the debate more than ten years ago:
In 1998, Mr. Mazerov co-authored a detailed report “A Federal Moratorium on Internet Commerce Taxes Would Erode State and Local Revenues and Shift Burdens to Lower-Income Households.” Sadly, the conclusions drawn in 1998 ultimately came to pass primarily, although not specifically related to what became known as the “Internet Tax Freedom Act” – which thankfully limited it’s so-called “moratorium” to only “Internet access” and “online services” specific taxation (this legislation was recently extended through 2014). Particularly prescient was their conclusion at the time:
“The avoidance by affluent consumers and businesses of sales taxes on Internet purchases could mean higher sales taxes or reduced public services for low- and moderate-income households”
In 1999 Mr. Mazerov authored a summary report entitled “Should the Internet Remain a Sales Tax Haven?” (also for the CBPP). Also a worth-while read on the subject.
Finally, and perhaps most insightfully, in February 2000, Mr. Mazerov testified alongside Iris J. Lav (CBPP Deputy Director) before the US Senate Committee on the Budget:
“When a seller does not collect and send the tax to the state of the purchaser, customers who receive the goods are supposed to pay state and local sales taxes directly. Consumers are supposed to file a tax return showing the value of the untaxed goods they have purchased from remote sellers and to pay the tax on those purchases. More than one-third of the states actually provide information and forms in their personal income tax booklets to help consumers pay sales taxes on purchases from out-of-state companies. Nonetheless, compliance with this self-remittance requirement is minuscule in the case of individual consumers and spotty in the case of businesses especially small businesses.
The combination of weak tax compliance by consumers and the limited obligation of remote sellers to collect taxes is eroding the sales tax base of state and local governments. As I will discuss shortly, it is disproportionately upper-income households who are avoiding paying their fair share of sales taxes by purchasing from remote sellers. Both the revenue loss and the unfair tax advantages for the affluent are likely to increase because of the still more rapid growth in Internet purchasing that is projected to occur in the next few years.”
Their testimony concluded:
“If initial steps are not taken soon to end the de facto sales tax exemption that applies to most Internet and mail-order purchases, the sales tax burden on lower-income Americans is likely to rise and the access of all citizens to high-quality education and other critical state and local services could be impaired. These outcomes will be all the more severe should Congress enact a blanket sales tax exemption for Internet purchases or even tighter restrictions on the ability of states to require remote sellers to collect and remit sales taxes than currently exist. There is a practical alternative to both of these options. Congressional endorsement of the principle of equal tax treatment of retail store purchases, mail-order purchases, and Internet purchases could encourage the electronic commerce and mail order industries to work constructively with state and local governments toward a workable compromise. Such a compromise could achieve a reduction in sales tax compliance costs for many businesses, while ensuring both that no business or individual avoids paying a fair share of sales tax and that state and local governments remain capable of financing necessary services”
It seems without question that the CBPP has been familiar with the issues at hand for quite some time – and that Mr. Mazerov is more than sophisticated on these matters, and we eagerly look forward his updated report on the matter, which we predict will be titled: “The first decade of Internet Sales Tax (or lack thereof).”