A new article in the National Law Review provides a thoughtful analysis of the issues surrounding online sales tax and the Main Street Fairness Act. We’d recommend it for the thorough background on sales tax and out-of-state sellers alone, which is the best we’ve read, but it also offers a cogent, well-thought-out argument for the Main Street Fairness Act.
We’ve provided some of our favorite quotes here, but we highly recommend reading the entire article. It’s well-worth your time.
On why the current system of requiring individuals to pay the tax due on their online purchases directly to the state is actually dangerous for online retailers:
It is much simpler and more intuitive for consumers to pay the tax up front as one swift transaction than to log their purchases, store the information, and file a use tax return with their payment at some later date. The increased hassles of recording each purchase could drive people back into brick-and-mortar stores, nullifying the efforts of Amazon and other remote sellers. For this reason, remote sellers should embrace the Main Street Fairness Act as a means to create certainty and consistency in the marketplace.
On supporting federal legislation rather than leaving it to the states:
The Main Street Fairness Act would grant federal authority to states, thus allowing states to enforce sales and use tax laws that are currently in place but are often not obeyed. . . . While states have had some success tackling the noncompliance issue on their own through enacting Amazon laws or similar statutes, the federal government is the sole body that is constitutionally charged with regulating interstate commerce and therefore should provide states with a tool to help them enforce their laws and uniformly tax interstate commerce. If passed, the Main Street Fairness Act could effectively serve as that tool.
On recent changes in consumer shopping habits that are hurting local retailers:
Recent studies indicate that many consumers are beginning to follow a “just looking” trend whereby they test products in local stores by seeing, touching, and feeling them, then rush home to order the same products online where they can avoid paying sales taxes. According to one consumer behavior report, seventy-five percent of online consumers sought to purchase from merchants that did not charge sales tax and offered free shipping. The savings are even greater when buying in bulk, thus enticing large organizations to shift their purchasing patterns away from small local retailers to reduce costs in a bad economy.
And finally, on why the Main Street Fairness Act is the best solution:
This system is ideal because states can preserve their independence by joining or leaving the Agreement at any time, while providing substantial benefits to out-of-state retailers by simplifying and unifying their reporting requirements. The Main Street Fairness Act is the bandwagon heading toward uniformity and fairness in sales tax collection. States just need to jump on.