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10 Reasons Internet Sales Should Be Taxed
The U.S. Supreme Court ruled in 1992, in Quill v. North Dakota, that retailers do not have to collect sales tax in states where they have no physical presence. At that time, the decision was for the sake of mail order companies, which operated without stores or warehouses in states where they conducted sales. It has since been extended to include online businesses for the same reasons, which essentially state that collecting taxes for numerous states with different tax codes, as well as thousands of different localities within those states would cause an undue burden on these businesses. This ruling should not apply to online businesses, and I’ll tell you why. Here’s a list of 10 reasons why Internet Sales should be taxed:
- Exemption was originally decided on to avoid burdening retailers from having to collect taxes from 45 states and 7500 different local taxing jurisdictions. This burden has since been alleviated via available software that makes the task of tax collection very simple.
- Exempting internet retailers from collecting taxes unfairly disadvantages local merchants who are required to collect taxes.
- Local police and fire departments, schools and other services lose out on much-needed tax revenues that are not collected through internet sales.
- The Streamlined Sales Tax Project, involving 44 states, is an agreement to create uniform take codes in order to ease the burden of tax collection by companies doing business in multiple states. Twenty-four of those states have passed legislation to enact these new tax policies.
- Entity Isolation, a loophole by which companies have in the past avoided the responsibility of collecting taxes by claiming that their internet businesses are distinct entities separate from their physical stores, has been successfully challenged in state courts.
- The National Conference of State Legislature found in 2010 that if state taxes were collected by internet businesses, 13% of states’ combined budget deficits could be eliminated.
- The Main Street Fairness Act, which was introduced to Congress in 2009, would allow states to require large online retailers who can afford the cost of equipping themselves for the task, to collect state taxes from their online customers.
- Customers who patronize online retailers are benefiting from services in their states while the sales taxes which pay for those services are not being collected on their purchases.
- While internet shoppers are still liable for the taxes on their purchases, few are claiming these purchases on their tax returns, so the taxes go uncollected. Requiring online retailers to collect them would ensure that these taxes were recovered for the individual states.
- As internet sales represent a larger and larger percentage of overall commerce, more and more tax revenue will be lost to states and municipalities, which rely so heavily upon them.
Clearly, the time has come for legislation that reflects the realities of modern-day commerce. Let’s allow states to claim their share of revenue that is being conducted in their constituents’ homes, as companies profit from those sales while state services suffer.
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