Tax Analysts Blog

Balderdash Masquerading as Tax Policy Arguments

Posted on May 15, 2013

It is no secret. This may hurt my libertarian credentials, but I believe the U.S. Congress should pass the Marketplace Fairness Act. The tax system is sound when built on a broad base and low rates. Broad base means you tax everything without regard to who is lobbying the legislature. It follows – and it really does follow – that the sales tax should be imposed on all personal consumption. You should pay tax whether you buy a book, opera tickets, legal services, or music. And it really should not matter how these products and services are delivered. You should pay the tax whether you receive something from a store in the mall, a UPS delivery truck, or on your iphone. That is good tax policy and anyone who disagrees has not done enough reading on what the giants in the study of sales taxation (think Bill Fox, John Mikesell, etc.) have been saying for decades.

Now we know that the only way the sales tax works is if the vendor collects the tax and remits it to the state. Otherwise we have to rely on the use(less) tax. So we have long made the brick and mortar stores collect the tax under threat of all kinds of sanctions. Let’s say that we make the Walmarts of the world collect the tax as a toll charge for the privilege of conducting business. Quill prevented that quid pro quo for remote sellers. And the Marketplace Fairness Act is designed to address the problem. (The problem is that if remote sellers don’t collect, then the tax is not paid and the goal of taxing all personal consumption is not met.)

Many thoughtful conservatives criticize the overturning of Quill because it will lead to more taxation and more government – neither of which they believe is desirable. I do not believe it is desirable. But that illustrates a spending problem – an issue that should be distinct from determining the proper way to impose taxes.

But many opponents of the Marketplace Fairness Act argue that the law will impose “great”, “grave”, “stifling”, and, yes, “job killing” burdens on business. That is hogwash. As I have stated before, a small child with access to Google can figure out the sales tax in every state. In 2013, the thought that identifying and collecting the sales tax would be burdensome to anyone is ludicrous. Companies can figure out what I ate for breakfast this morning. They can figure out the sales tax in Virginia. Right now there are off the shelf products that will determine the tax based on billing or delivery addresses. These tax products are inexpensive. Ebay and others are whining about the $1 million exception as being too small. Those retailers somehow figure out a way to market and sell and deliver products around the world. But they can’t figure out how much tax to charge? They don’t seem to have a problem figuring out how much shipping to charge.

The burden argument against the Marketplace Fairness Act is no more valid than it was in Quill. If a retailer can’t figure out the tax (or feels that it is too burdensome to try) it can refuse to sell into a state. But that will never happen.

Read Comments (1)

John DoeMay 18, 2013

Found a link to your article. rothcpa.com offers a concise critique to the new
internet tax increase.
No worries, your credentials as a libertarian remain intact.

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