We’re all for fairness, right? So who could possibly be against something called the “Marketplace Fairness Act”? If I’m in favor of free markets and everybody playing by the same rules, should I be for such a bill? Unfortunately, many small businesses have bought into the notion that the new internet tax bill before the US Senate will somehow help them by “evening the playing field”; forcing online retailers to collect sales tax the same way brick and mortar stores do. I’m curious how many of those supportive of the bill have actually read it.
Online retailers are much like the catalog sellers of the past. Back in 1992, in the Supreme Court case of Quill vs North Dakota, the Supreme Court rightly found that a state cannot force out-of-state catalog businesses to collect sales taxes for them. Although the federal government has the power to “regulate” interstate commerce, the commerce clause was put in place to keep states from applying taxes and regulations on out of state businesses. The Marketplace Fairness Act does just that; requiring retailers to collect taxes for states they do not operate in, clearly violating state sovereignty.
Far from evening the playing field, this bill places an enormous burden on small online retailers. The bill is aimed at internet giants like Amazon, but the majority of retailers are NOT Amazon, and can not easily absorb the costs associated with collecting taxes for 10,000 different taxing jurisdictions. The law is simply unworkable, and the costs are unimaginable for small online sellers. A woman who sells arts and crafts online should not be put out of business so that “brick and mortar” stores can compete with Amazon.
The tax is not just laid on consumers. It costs businesses a lot of money to worry about paying taxes; hiring accountants, lawyers, etc. and going through different audits for each of the 10,000 taxing jurisdictions. Come on! The sales tax is more than a tax on consumers; it is a tax on businesses. In this case, out of state businesses – and that is called taxation without representation.
In fact, the unknown reason behind this bill is not that it will help small brick and mortar stores compete with Amazon, but that it will hurt small online retailers and help Amazon. That’s right – guess who is supporting the bill – Amazon! That is because Amazon can absorb the costs associated with the Marketplace Fairness Act, but their smaller online competitors can’t.
The bill will likely not help traditional sellers anyway. If brick and mortar stores believe that the sole reason people shop online is because of sales taxes (or the lack thereof), they need a reality check. Better selection – better prices – more convenient. Unfortunately, many small business owners favor this bill because they think it will “hurt their competition”. In reality, it doesn’t, and will help big online retailers push small online retailers out of the market. The way to win the race isn’t by slowing the other guy down; its by speeding yourself up. Passing laws to hurt the competition is called crony capitalism, folks.
Perhaps the worst thing about this bill is all the people only looking out for themselves. Regardless of who the bill “helps” or “hurts”, (because it is clear that it is anything but “fair”), first ask – does this bill help the country as a whole? Is this a good thing for business, or a bad thing? Will this help government grow, or shrink? Will people end up paying more in taxes or less, and have less disposable income or more? The point of having different taxes for different places is competition – but this system does away with that. If states want to compete with online sales, they should do away with their sales tax altogether.
There is a supposed $11 billion in sales taxes left out there uncollected because of internet sales. When this bill becomes law, as it likely will, that means that $11 billion will leave the private sector, and end up in the hands of politicians and bureaucrats, where it will be spent much less wisely than it would have been otherwise. Call it fairness, but this bill forces consumers to pay, which means less money all around. When the government takes a piece of the pie, it hurts online and traditional retailers alike.
The bill is one more way that Congress can avoid actual tax reform. By pandering to various groups, in this case the National Retail Federation, politicians make promises and try to help this guy or that guy. The right thing to do is lower taxes all around, let people keep more of their money, and lower the burden of doing business. Unlike the Marketplace Fairness Act, this would help ALL businesses, regardless of where their customers find them.