Tuesday, May 7, 2013

Congress acts on sales taxes for online purchases

The Senate has passed and sent to the House a bill requiring online or catalog retailers to collect sales tax and send it to the state where the customer resides. Local retailers, as well as national chain stores, have fought a long time against the prevailing norm of online sales going untaxed while they had to collect the tax. Online retailers, they argued, were getting an unfair advantage while local retailers' prices, including state and local sales taxes, might be 10 percent higher than online prices.

When I was in the newspaper business, the N.C. Press Association pushed hard for state legislation that would force online sellers to collect state sales taxes. The newspapers were looking out for their advertising base. Online sellers do not advertise in the local newspaper, so newspaper publishers were eager to help their primary source of revenue.

I was troubled at the time that the Press Association was taking the side of the retailers against the interests of most readers, who were benefiting from the lack of sales tax when making online purchases. But my primary concern was the constitutionality of any state's efforts to force businesses in another state to collect that state's taxes. The Constitution, in Article I, Section 8, gives Congress exclusive power "To regulate commerce ... among the states." Clearly, only Congress has the power to tell one state's residents that they must collect taxes for another state. Advocates for a state requirement that other states collect North Carolina's sales taxes ignored this little impediment.

Congress, which does have the authority to require non-residents to collect taxes for another state, has awakened at last to this issue. Congress should level the playing field that is now tilted against brick-and-mortar retailers. States — and some cities — will rejoice if Congress approves a requirement to collect sales taxes on interstate sales, but online retailers might still have an advantage. The ease of shopping from the comfort of home and quickly scanning through thousands of available products cannot be matched by the big box store down the street or the mom-and-pop store at the corner.

1 comment:

Judith said...


I couldn't agree more about the constitutional issues. I get extremely uneasy when NC makes laws or amends its constitution, while ignoring (as I see it) the US constitution.

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