Research: Video: Internet Sales Tax
C-SPAN: The Communicators – Internet Sales Tax
Scott Peterson – Streamlined Sales Tax Governing Board
Jerry Cerasale – Direct Marketing Association
Peterson and Cerasale discuss the issue of sales tax on the Internet. High points in the discussion revolve around whether online taxation would level the playing field between online retailers and brick-and-mortar locations, and whether or not states would do serious damage to the economy by attempting to tax out-of-state business.
This claim of complexity is less and less impressive over time. The answer is pretty clear: create an interstate compact, perhaps run by this tax simplification board that one of the guests represents, and have it operate as a sales tax clearinghouse for all states. In fact, I bet states could use it as outsourcing for their own sales tax collection.
States would be required to supply to the entity data on tax rates in the state by zip code, possibly by 9-digit zip code, and by calendar day to account for tax holidays and any changes. The entity would create mechanisms, electronic and otherwise, for retailers to query taxes due on a transaction to a particular customer at a particular location. The retailer could pay what is due to the entity which would forward it on to the state. It would actually be simpler than the current setup.
In effect, this is a tax increase on a lot of people for a lot of their business, but it’s not fair that remote businesses should enjoy this tax advantage over retail establishments with actual local presence.
I should add that after thinking about this more, I see that the definition of which items are taxable makes the matter more complicated, but certainly not insurmountable. I maintain that a central clearinghouse, and not individual software packages, is the right answer.
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