VOL. 127 | NO. 29 | Monday, February 13, 2012
A story from The Memphis News
On newsstands throughout the city
Fairness Act Offers Sales Tax Solutions
The Memphis News
The smallest business with a product or service is being encouraged to think globally in today’s dynamic economy.
What used to be trade between nations is now trade among nations and companies with an emphasis on keeping the rules that govern the conduct between nations and bridge the differences in their laws to a minimum.
It turns out we still have some work to do in the United States when it comes to businesses with a national reach from one centralized bricks-and-mortar location.
So Washington’s ongoing debate about whether to pass a national sales tax or give individual states the option to collect sales taxes owed under their respective state laws in an important one.
The discussion is also an old one that began in the 1980s with the rise of mail order catalog businesses able to ship their goods via FedEx from anywhere in a greatly reduced timeframe. Ordering by telephone became ordering by website and now smartphone app.
The National Conference of State Legislatures estimates online sales will cost states $23 billion in tax revenue in 2012.
We believe the solution should be as simple as the technology that now allows the sales tax to be collected without the burden on interstate commerce the U.S. Supreme Court saw in 1992 when it limited the ability of states to collect this revenue stream without Congressional approval.
For that reason, we favor the Marketplace Fairness Act introduced by U.S. Sen. Lamar Alexander of Tennessee and others late last year.
The legislation includes provisions that exempt businesses with under $500,000 of remote sales. There should be more discussion about whether this exemption is sufficient to keep new collections of an existing tax from killing off business still in the act of growing.
It won’t be adequate to simply spread the pain from bricks-and-mortar retailers to online retailers who are just as modest in their initial outreach. And the truth is the line between the two types of retailers is rapidly vanishing if not already gone.
There are too many differences from state to state in tax regulations for any kind of federal supervision to be practical. That’s also the reason cooperation from businesses like Amazon is essential to making this work.
There are few legislative bodies content to take in the view of a newly created revenue stream and not begin thinking about ways to divert a bit of it for their uses.
The state-by-state arrangement could also provide a different sort of marketplace dynamic in which corporations like Amazon exert their own market influence over tax policies.
States making it too cumbersome for small businesses encounter little resistance. When that pain spreads to large corporations, the feedback is loud enough to call for much-needed changes.