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Why Do Democrats Want an Internet Shopping Tax

Internet Sales TaxCall it the eBay or Amazon tax – or perhaps the Barnes and Nobles, Apple Store or New York Times Online tax – call it whatever you like, but it is a tax. A tax proposed by Illinois’ own Senator Duck Durbin (D) that will be levied on all online purchases.

The Main Street Fairness Act, as Sen. Durbin’s bill is named, aims to reverse the decades long moratorium on online purchases that was put in place to foster online commerce. Now that virtual stores are actually closing down their brick-and-mortar counterparts the Federal government is looking to help the states.

There is a constitutional component involved. When someone purchases something online from a site that has a physical store in that same state, most states enforce the collection of state sales tax from the consumer. It is only when someone makes a purchase across states lines that the feds are even permitted to intervene, thanks to the [Interstate/Indian/Foreign] Commerce clause.

To regulate Commerce with foreign Nations, and among the several States, and with the Indian tribes [1]

The commerce clause has long been used by those in favor of a stronger central government so it should come as no surprise that it is Democrats doing more of the same.

There is a problem with the thinking on this bill. It will now create a situation where online retailers now suffer a bit of a disadvantage. A buyer selecting a $20.00 item from shopping.com would then get to pay a state sales tax on top of the shipping costs AND will have to wait a few days for their purchase to get there, possibly damaged in shipping.

With the new bill not offered up to the public as of yet, analysis was done against H.R. 5660, a bill with the same name but submitted last year by Sen. Durbin.

There are many legal and common sense perspectives to consider. First, is the Supreme Court Case of Quill Corp. v. North Dakota, which the bill cites as a basis of authority. Quill is an office furniture retailer that had no facilities nor employees in North Dakota and therefor positioned that it was no burden on the state which gave the state of North Dakota no standing to force Quill to collect sales tax for the state. Notice, the argument isn’t about whether or not the consumer should pay sales taxes, but rather who could be compelled to collect them.

With the legal out of the way, comes the common sense. Imagine the complexity a business would have to deal with the understand the sales tax rates of each State, the counties that add a bit and the municipalities with their extra .25% sales tax. The chart of taxes is difficult enough to deal with for in-state companies, much less someone trying to operate a nation-wide concern.

Then – the costs. H.R. 5660 lines out the funding for:

  • Implementation of an online multistate registration system
  • Establishment of advisory councils
  • Provisions for funding and staffing the Governing Board

It should go without saying this will only skim money off the collected state funds. It would necessarily have to. That multi-state registration system won’t build or run itself and the councils and governing boards will be filled with even more bureaucrats that make huge sums of money and get ridiculous benefits. By the time that money gets to back to the states from which it came, it will be a fraction of what it once was – if it gets back to the states.

The final and most important part is that the Federal government will now control the revenues that come from these purchases. That will allow them yet another carrot and/or stick to use against the states. Similar to how the federal government pressures states into certain provisions in order to receive federal highway dollars, the states will be given orders that they must follow if they want to receive their share of the federal internet sales tax money. This is another attempt of the central planners in our society to weaken the power of the states. Imagine how the federal government could affect a cash strapped state like say .. Wisconsin, when they aren’t playing the way the majority in Congress desire.

This tax isn’t about ending budget shortfalls for the states. They could do that on their own, although painfully, without this kind of intervention. This is about power – pure Federalist, big-government power. The bill only requires 10 states to sign on which is almost certainly an indication that the bill’s sponsors know that not very many states will cede their sovereignty just for a few crumbs from the Federal table.

Sources:

[1] – Constitution of the United States – Article 1, Section 8, Clause 3

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