Either action between paying and not paying tax on Internet sales has nearly equal justifications. For instance, Internet retailer Amazon.com, notes that imposing a tax on Internet sales should be opposed because first it would be administratively cumbersome and second the companies that would be required to pay these taxes obtains no meaningful benefit from the states. These companies operate online and, therefore, maintain no facilities within the states.
However, payment of these taxes will be of great importance in the provision of local and state government revenue. This revenue is significant in the provision of social amenities such as schools and medication for the common interest of all. According to statistic, states lose approximately $7 billion annually due to uncollected Internet sales taxes stemming from a 1992 U.S. Supreme Court ruling. The ruling allowed catalog and Internet sellers not to charge taxes on customers if there isn’t a physical presence. Moreover, the decision put forth that it was the responsibility of the customers to remit their taxes to their states.
With regards to the law that Internet retailers need to pay sales tax in states where there are physically present, then these sellers will have to put up large warehouses in these states. This will have a direct implication of creating more job opportunities than when all transactions were done over the internet, hence, improving both economic growth and development of the particular state.
According to Market Fairness Act, failure to pay taxes on Internet sales gives the online retailers a competitive advantage over the physical retailers. Arguably, locally sold products will appear more expensive due to the additional tax charges as compared to online products that are tax-free. Consequently, buyers will prefer shopping online as opposed to locally, which will have profound consequences for the states’ and the entire country’s economy.
As Mathew Shay points out, taxing internet sales would lead to fairness. Online sellers play by different rules and enjoy an unfair competitive advantage over local retailers. They have an advantage since they can charge lower prices that the local sellers cannot manage. Tax on internet sales will allow all seller to play on a level playing ground. Furthermore, failing to charge tax on internet sales reduces the tax base hence both the federal government and state governments lose billions of revenue.
With regards to the discussed benefits of taxing online sales, the legislature should come up with a better law that will enhance marketplace fairness, hence combating the inefficiencies of the 1992 Supreme Court ruling that is now apparently outdated. The law should allow taxation of states sales irrespective of whether there is physical presence between the traders or not. Besides, it should allow states to collect their sales tax rates for both catalogue and online sales within and outside the state bodies. At least, this will help in bringing additional revenue, which would help in financing states budget deficits. More importantly, it would enhance market fairness, hence, promoting local manufacturers.
References
Shay, M. R. (January 7, 2016), Tax Internet Sales for Fairness, Federalism. Retrieved from http://www.wsj.com/articles/tax-internet-sales-for-fairness-federalism-1452196464http://www.wsj.com/articles/tax-internet-sales-for-fairness-federalism-1452196464
