The Perfect Internet Sales Tax Solution – Simple, Fair, Effective
The United States congress is currently considering an option to allow States to collect sales tax from internet sellers in other states. While we understand and even agree with the fundamental need for these funds, we question the reasoning in how this is to be done, the way it is to be managed, and the plethora of questionable assumptions being made. We believe there is a simple solution that satisfies everyone’s questions and all it requires is a change back to the original reasons for the creation of sales tax.
It is a Sales Tax not a Buyer’s Tax
Sales tax is based on the sale of an item, not its purchase. When sales tax was first initiated, it was assumed the seller would collect a tax on the sales of goods and services he sold in his community. The resulting tax would support the fire department, police department, road construction or infrastructure and other services in the seller’s community. His contribution of time and effort would help educate his future employees and build a better life for his current ones. In short, the tax was created from the seller’s sale of an item. Without the seller, there was and is no sales tax. The sales tax was created to help develop the environment for that sale.
There are many problems associated with the current proposed system, but the main one is the inaccurate assumption that a sales tax is support for the buyer. This is a misappropriation of sales tax because it neglects three important points:
- The Seller creates the opportunity to sell
- The Seller is charged with the added burden of tracking and paying the sales tax.
- The Seller only participates in the use of the tax when he is represented in the community in which he collects that tax.
The Buyer does not initiate the tax to their community because:
- The Buyer visits the Seller’s site to purchase the item.
- The Buyer has a choice as to what and where they buy (and to whom the tax goes).
- The Buyer does not support the Seller’s community (that helped create the sale), other than the price of the item, unless they pay the sales tax.
If a Buyer travels to New York and purchases a Mickey Mouse shirt at the Disney Store, the buyer will be charged all of the city, county and state sales taxes that apply. They do not show their identification and then claim, as there is no sales tax in their state of New Hampshire, they should be exempt from sales tax in New York. Fahgettaboudit! They have visited the Seller and it is the rules of the Seller’s state that apply. We believe this is just as true when you visit a web site.
The Simple Solution to The Internet Sales Tax.
A seller in Massachusetts already collects and reports sales tax of 6.25% on every taxable item he sells to in-state customers. This is true in 45 of our 50 states (Deleware and New Hampshire have no sales tax while Alaska, Montana and Oregon do not collect state sales tax but do have local surcharges). It is true for Brick and Mortar stores as well as Internet dealers. No matter how much they sell in state, they must report and pay the sales tax.
The simple solution is to expand this to all sales, no matter where the buyer resides. This is true for anyone who visits a Brick and Mortar store and it would be true for the Internet seller whose site is visited by an out of state customer. No one is treated differently and the state where the transaction occurred gains the benefit of helping create the sale and supporting the business.
In this solution it becomes advantageous for the states to attract these internet sellers. The money they could collect from their online sales would be worth competing for
The Burden of Sales Tax Collection is 9,600 to 1
It has been wrongly assumed that the collection of sales tax by sellers across a wide range of 9,600 tax jurisdictions (per TaxFoundation.org April 11, 2012) would be easy and free. There are several firms that will willingly take on this task by adding it to an existing online shopping cart for a fee. In our investigation, we were quoted prices of $1.56 per transaction or higher, to some that wanted an initial fee of as much as $7,395. This was on any sale from a few dollars and up.
Whether there are online sources that offer this service for free or at a small cost, two factors are important:
- Many businesses cannot afford to risk using free sources for financial accounting.
- All systems need to be integrated and monitored at the cost of the Seller.
Adding new software and monitoring its use is never an easy task. There are always costs involved in setting up, debugging, maintaining and updating systems. These costs will always be the responsibility of the sellers and they remain an unseen tax of time and resources on their businesses.
When we view the sales tax collection burden as it was originally meant, the Seller only needs to apply one sales tax jurisdiction, a sales tax jurisdiction to which the Seller is already reporting and paying: their own. There is no need for more accounting, additional reporting or any other concern other than doing business.
Making Business a level playing field with a fair Internet Sales tax plan
We agree that businesses should be on a level playing field, however the current Marketplace Fairness Act or Mainstreet Fairness Act does not do that. These acts would impose higher restrictions on dealers who do business on the internet than those that do not. As we have said, instead of one jurisdiction, the internet dealer would need to be responsible for over 9,600. Even if the act was able to “streamline” the tax collection process, it would be beyond what their Brick and Mortar counterparts are required to do and it would not be why Sales taxes were originally created: to support the business and create the sale.
The internet has been a boon for individuals and even brick and mortar business across the globe. Its ability to allow people to create, develop and compete around the world remains an important tool in building our economies. If we saddle these companies with jurisdictional problems that their competitors do not have, we are choosing to weaken the engine that has driven this country forward for the past two decades. We are not saying no to a Sales Tax, we are asking that we follow what sales tax was designed to do and we make it fair!
We will continue to support and discuss this important position. We welcome questions and alternative opinions to help resolve this issue quickly and fairly. We only ask that people listen and help if they can.
Please send your questions to: Info@TheInternetSalesTaxSolution.com
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In Fl, it’s called sales and use tax. Sellers pay sales tax, buyers are supposed to report & pay the same rate as a use tax, if they do not pay sales tax when purchasing product, when the seller is not required to collect the sales tax.
Even though they have exempt businesses making less then a million a year that could change once state get used to collecting the money and need more. So don’t think this is just going to hit the big guys. Eventually it will hit all of us. Right now the states are like junkies looking for a money fix. This must be stopped NOW so who ever you are, small business, customer, etc write your legislators and say now to the bill. The Marketplace Fairness Act is not fair. We should only have to pay taxes in our state. I have no problem collecting tax on every sale and giving it to my state but I will not be able to collect taxes for every place in the USA and let’s face it if they find a way of us collecting taxes from foreign customers too this will really balloon up.. If we have to collect it then the B&M stores should have to do it also. Good article.
The other problem is that our customers have to pay shipping which has gone up significantly in the past few years. This is a cost our customers have to pay in order to use us. This is a cost most B&M stores don’t have to deal with.
They do deal with it, but differently. The internet offers some advantages and B&Ms have others. The customers are the end deciders of what works best for them.