The real reason Congress wants to tax your online purchases
September 3, 2012
By all reports, sometime within the next 16 months Congress will pass a bill that puts an end to tax-free Internet sales, requiring online vendors to collect sales tax, just like the brick-and-mortar stores do. Their reasoning for this legislation, that states are losing tax revenue, sounds logical enough. But when you take a closer look, you might as well be looking through a piece of Swiss cheese.
Let’s assume our average Jane Doe has $1,000 to spend on Christmas presents this year. If she goes to her local shopping center she can purchase $930 worth of goods for her $1,000. The state she lives in gets the other $70. But, if Jane spends her $1,000 online she can purchase $70 worth of additional merchandise because the state’s not dinging her for taxes.
So far, it looks like Congress is right. The state just lost 70 bucks to an online retailer.
However, someone is going to have to deliver those packages to Ms. Doe. And that someone will probably collect a delivery fee from either Ms. Doe or the online retailer. They’ll also have to pay an employee to drive the truck to Ms. Doe’s house.