The Ban on Internet Sales Taxes


Very early in 2004 Congress will probably reconsider whether to extend the ban on most Internet sales taxes. Now, with so many states and localities hungry for revenue given federal assistance cuts, there is political pressure from states to end the ban.


Under current federal law, e-commerce merchants must charge sales tax (according to the individual state law) to residents in states where the retailers are physically present with stores. Some retailers with physical stores have actually charged sales taxes for all states because customers can come to their stores anyway. True e-commerce companies, of course, cannot do this.


The National Governors Association Streamlined Sales Tax Project (NGA) proposes to simplify sales tax, and 42 of the 45 states that collect retail sales taxes participate. This is well intended, because compliance with a multitude of local sales taxes could prove burdensome to e-commerce companies, although perhaps a boon for software companies. However, there is legitimate concern from businesses that sell largely by e-commerce that their competitive position and ability to earn profits will be severely compromised if the ban is lifted.


My own books (both self-published and cooperatively published) are largely sold through e-commerce, although some customers have told me that they ordered my books physically in Barnes and Nobles stores. Some have ordered from me directly, and I have always kept track of the sales on my own spread sheets and paid (now with electronic checks once a year) the local taxing authorities where I do business (Minnesota or Virginia, for every sale) but not where the customers lived, as I do not have a practical way to do that.  It would be hard for me to comply, although I could devise some kind of simple system on, say, Microsoft Access, to keep track of sales by consumer states. Many of my own direct customers have been in the same states where I operate, however.


I have sometimes been charged sales tax by e-commerce vendors, and it has not been a big deal. I usually buy books, classical music CDs, or movie DVD’s on the Internet, and mostly I buy obscure items from smaller publishers or independent films that might be harder to find in physical stores.


David Wyld has a good overview of this issue.[1]


ăCopyright 2003 by Bill Boushka, subject to fair use.


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[1] David Wyld, “Internet Sales Tax Ambusg,” The Washington Times, Dec. 10, 2003, p. A16.