Lamar Alexander Signs On To Internet Tax Law

And you thought Republicans hated taxes? Hah!

CNET has learned that two Republican senators are preparing to introduce new legislation that would allow states to force Amazon.com and other out-of-state online retailers to collect sales taxes.

Sens. Mike Enzi of Wyoming and Lamar Alexander of Tennessee are currently putting the final touches on their bill, which is backed by Wal-Mart Stores, Best Buy, Home Depot, and other companies that are currently required to collect sales taxes. It’s a bipartisan concept: a related effort was embraced by Democrats including Sen. Dick Durbin of Illinois a few months ago.

I’ve long felt that the internet tax exemption was going to be history sooner rather than later. It was just a matter of time.

I’m just curious if this will kill the tax exemption for other out of state retail sales, too? I thought the reasoning behind the internet sales exemption was that any retailer lacking a bricks and mortar location in a particular state didn’t have to charge sales tax. That’s why if you travel out of state and buy from a store and have your items shipped home, you don’t have to pay that particular state’s sales tax. (Of course, you’re supposed to voluntarily pay that tax in your home state but really, does anyone do that?)

Am I understanding this incorrectly?

Anyway, I know a bunch of people are going to whine about this because a lot of folks have had a free ride for a long time. But I never really understood the logic behind these sales tax exemptions in the first place.

20 Comments

Filed under Sen. Lamar Alexander, taxes

20 responses to “Lamar Alexander Signs On To Internet Tax Law

  1. Southern Beale:

    States like NH having no sales tax have megamalls located in cities that sit at the borders of the states they abut. Having lived in the border area of MA and NH for years I can attest to that. When I lived in MA I would buy lots of building supplies locally, but if I had a big ticket item I would look for it in NH. I don’t think any state allows you to buy a motor vehicle or any other conveyance that requires a registration without paying sales/excise tax in the state in which it will be registered.

    • deep cap

      Though every once in a while you hear about Massachusetts cracking down on someone who failed to pay their Use Tax. Inevitably it’s someone who went to NH, bought a Jacuzzi, and thought that the DOR wouldn’t notice a $3000 addition to their house.

  2. OT, Southern Beale:

    Did you go look at Mack’s new puppy? She’s a cutie.

  3. Well, it wasn’t too long ago that the TN Highway Patrol (I think??) was busting Tennesseans crossing the border into Kentucky to buy cartons of cigarettes. And we used to buy lottery tickets in Franklin, KY which is right on the border.

    I’m pretty sure every state experiences this stuff to some degree, be it reaping the rewards or losing out on the revenue. Just one of the bizarre things about every state having their own tax structure because STATES RIGHTS yada yada.

  4. Min

    Tennessee’s decision to rely so heavily on sales tax as a revenue source has long been a problem, simply because 5 of Tennessee’s 6 largest Metropolitan areas are on or close to a state border. We’ve been leaching sales tax revenue for years.

  5. Joe

    As an occasional online seller, I’ve long suggested that such sales should be subject to appropriate sales tax. Set up a central clearinghouse and develop the software (or build it in to your selling site – eBay, ecrater, Overstock all have the means to do this. Amazon certainly does too. Here in Ohio, I have to calculate sales tax on the buyer’s resident county, so I go to a state site, put in the zip and determine the percentage. We have 88 counties and multiple rates depending on the locality. On my sales site, I generally collect 7% (especially on ecrater which doesn’t charge tax on the shipping, but Ohio does), and remit what is owed. Do that online too. Very simple. This has long put brick & mortar sellers at a disadvantage. And you’re right, few taxpayers declare all the items they buy from out of state. The tax is due, create the mechanism to collect it. Again, I’m a seller & I’m all for this. It’s long overdue.

  6. John Weiss

    If your state has a sales tax you all should get rid of it. Sales taxes are both regressive and a hassle for retailers. Here in Oregon we have no sales tax, we have a scaled income tax.

    To one of the other points: yes, we get many California residents shopping here; some days it seems as if there are more California plates in the Fred Meyer’s (Kroger) parking lot than Oregon ones.

    I live in the far Southwest.

    • ThresherK

      Does California tax food?

      I mean, real, ordinary, buy it in the store and open and prepare it at home food? (Not to be confused with restaurant food, or carry-out hot prepared foods. The latter is the real growth area of supermarkets over the last decade or two, the bidness papers say.)

      I think either KY and/or TN does.

    • We have a sales tax but no income tax. Our sales tax is one of the highest in the country. It depends on what you buy … I thought we’d ditched the food tax but this says it’s still 5.5%.

      • Jim

        The tax on food was reduced, but it is still in place. I think the local sales tax still applies to food as well. I think localities are allowed to add up to 2.5% or so to the state sales tax.

  7. Bob

    “I thought the reasoning behind the internet sales exemption was that any retailer lacking a bricks and mortar location in a particular state didn’t have to charge sales tax.”

    There is no sales tax exemption. You are still required to pay your sales tax, even though the out of state retailer failed to collect them. In Michigan you are supposed to pay your uncollected sales taxes along with your income taxes at the end of the year.

    Most people don’t do it, but I just want to make the point that there is not exemption, you are actually, potentially breaking your state tax laws.

    • Right, and you’re supposed to pay the internet sales tax too … but who does that? That is why I said, Of course, you’re supposed to voluntarily pay that tax in your home state but really, does anyone do that?

      I guess my question is about the underlying principle at work, despite my clumsy wording (and erroneous use of the word “voluntary”). If this passes as a national law, I’m guessing you won’t be able to buy goods out of state and have them shipped home and not pay tax in the state where the purchase was made.

      • Bob

        “That is why I said, Of course, you’re supposed to voluntarily pay that tax in your home state but really, does anyone do that?”

        DOH! I overlooked that comment. My bad.

  8. Considering the ubiquity of reporting systems in use by retailers, shippers and the various levels of governments, all of the information is being collected and the means for compiling it is already being done. There is nothing to keep a federal plan from making it a requirement that all retailers, both b&m and virtual send EVERY customer a form, electronic or paper, that shows all purchases and the %age of taxes owed on those purchases. Given the gummint’s inexhaustible thirst for money I’m surprised that they haven’t already done it.

  9. Jim

    Can you imagine what would happen if sales tax collection was up to the buyer to file instead of the retailer? First would be widespread fraud, then probably alot of protests over the sales tax amount due.

    I believe the same thing would happen if income taxes were not automatically withheld from your paycheck. If every month you had to write a check to the government for your income taxes I bet there would be a slew of riots/protests. By the amount being already deducted, most people don’t realize how much they are being taxed.

  10. Jim:

    Tax cheats will be tax cheats. I get 1999’s for piddling amounts of money every year, as little as a couple of bucks interest. Do not assume the gummint can’t do the math. The thing about the “information age” is that they DO have the means to track you down and ream out your bank account if you try to cheat them. Doesn’t mean they WILL, just that they can. It keeps a lot of people from giving into temptation when they hear the horror story about some guy who’s lost his home and business and is wearing slip on sneakers at Club Fed.