Don't tax my Amazon Purchase!

August 3, 2001 11:03 AM

Don't tax my Amazon Purchase! Legislation is in process to permanently prohibit taxes on Internet purchases. Whatever will Massachusetts and California do for revenue? Tax a satellite or two, I'd guess.
posted by dwivian (9 comments total)

So why should I pay more for going into a physical store and buying something?
posted by brucec at 11:20 AM on August 3, 2001

dwivian: read the article again. What would be permanently prohibited is taxes on internet access: your ISP bill.

The panel sidestepped the more complex issue of whether state sales taxes should apply to Internet transactions.

Of course, if you then become able to pay for your online purchases through your ISP bill, then the states will sweat. But permanant is a relative term here -- what one Congress calls "permanent", the next can call "history", and states and state taxpayers will not simply bend over and grease up while sales tax receipts wither away.
posted by anewc2 at 11:54 AM on August 3, 2001

Did anyone else think that an acceptable alternative to this article's title would have been:

U.S. Gov't to States: Drop Dead

?
posted by Ptrin at 12:08 PM on August 3, 2001

you caught me! In my overzealousness, I missed the section that said it didn't apply to purchases.

Are there any taxes on ISP bills? Mine is pretty straightforward.
posted by dwivian at 12:48 PM on August 3, 2001

And, on that thought.... what of a provider that would "pay" for purchases, and bill you to your credit card with your normal ISP charge? Would this become a viability if such a law passed? "The New Earthlink Visa!", anyone?
posted by dwivian at 12:49 PM on August 3, 2001

The sales tax side is not an internet issue at all -- catalog retailers having been using the sales tax "discount" for decades to entice out of state customers.

It would have become a much bigger issue if the first generation e-tailers had figured out a compelling way to sell expensive taxable items on-line and across state lines. However, as we all know, clothing, furniture, appliances, major electronics, etc., have all been pretty much a bust as products sold by pure e-tailers.

Books and CDs were never so big an item of local tax revenue, and plane tickets and so forth are not subject to local tax.
posted by MattD at 2:22 PM on August 3, 2001

Yes, Matt D. But they still must charge sales tax to orders in which they have an office. The theory is in that the end, each state has enough mailers to recoup some money.
posted by brucec at 2:42 PM on August 3, 2001

So why should I pay more for going into a physical store and buying something?

Because you're not paying for shipping and handling?
posted by Hackworth at 3:58 PM on August 3, 2001

Don't mistake the legal issue -- which has to do with constitutional issues of the sovreignty of the states -- with any dispute over the public policy rationale or legality.

There is no principled argument whatever for not charging sales taxes on cross-state-border transactions. The public rationale is a combination of (a) defraying public costs in supporting the manufacture, shipment and sale of goods (which justifies charging tax where sold) and (b) defraying general public costs, utilizing consumption as a fair metric of taxability (which justifying taxing the purchaser where he resides).

Indeed, states do impose a (hard to enforce) use tax which requires the purchaser to pay sales tax to his own state, and do (infrequently) (but legally when they do) impose a gross-receipts tax upon sellers of goods which fully taxes all the goods they sell regardless of to whom.

My guess is that the "compact" will require each seller to collect and submit to their state of location all ZIP codes of goods sold, and each state will charge a sales tax based upon the ZIP code and split the revenue with the recipient state.

However, states with no sales tax of their own will certainly see no reason to participate...
posted by MattD at 4:53 PM on August 3, 2001