This blog post on Internet Retailer.com titled The Great E-Retail Sales Tax Debate presents a thoughtful look at whether and when the sales tax loophole for web businesses will close. The answers, according to the writer (Jack Love, President, CEO Internet Retailer), are ‘Yes”‘ and ‘Soon’, but he has a few issues with the Main Street Fairness Act’s approach to the problem. His arguments, and our FedTax.net responses are as follows:
1. Since local brick and mortar stores benefit from police protection, fire protection, roads etc. — but web retailers do not — web retailers should not bear the full cost of local tax.
We believe that sales tax, from a policy point of view, is meant to tax consumption by residents and use those funds for a variety of local initiatives, including not just fire, police and roads, but also parks, hospitals etc. Also, the local services used by local businesses is much smaller than the usage by the residents of the communities themselves.
2. Requiring web merchants to calculate and collect state and local sales tax would be a tremendous burden.
If you follow our FedTax.net blog, you know our answer to this objection – Not True! We have designed and built our TaxCloud service to comply with the Streamlined Sales and Use Tax Agreement (endorsed by 45 states). TaxCloud is easy for web merchants of any size to implement and operate. And, we offer TaxCloud free to merchants.
3. Imposing a federal excise tax on e-commerce would be a better solution.
We believe that the interstate commerce laws prohibit this kind of solution, and that the state-based approach advocated by MSFA and SSUTA is a much more reasonable and workable approach. Also, regardless of whether this is a good idea, it is not pending in Congress and would take a long time to pass — if the issues of interstate commerce could even be resolved. The Main Street Fairness Act is real, it is in front of Congress now and it has the backing of legislators, state government officials and a long list of retailer organizations including the National Retail Federation and the Retail Industry Leaders Association.
We look forward to more discussion on this article!