The U.S. Senate voted yesterday to approve the concept of an Internet sales tax by an overwhelming 75-to-24 margin.
The vote was largely symbolic and non-binding, but its support has some wanting to bypass the committee process for the easy passage of the Marketplace Fairness Act, according to The Verge.
The law, which opponents more accurately call the "National Internet Tax Mandate", would allow states to demand sales taxes from online retailers.
More exactly, "the Marketplace Fairness Act grants states the authority to compel online and catalog retailers ("remote sellers"), no matter where they are located, to collect sales tax at the time of a transaction," according to a lobbyist website supporting the idea.
In its current form, Internet retailers with less than $1 million in sales would be exempt, which at first glance seems palatable. But consider that if a retailer only makes a 10 percent profit margin, then they only take home $100K net profit before expenses. That's hardly a large company with the resources to learn a new system or hire someone to handle the extra bookkeeping.
Even foreign retailers (no matter where they are located) will have to charge, account for, and remit sales taxes for customers who may reside in a participating U.S. state. It doesn't matter that the retailer has no attachment to the customer's state or country for that matter. Can anyone see how this may hinder commerce freedom for U.S. customers?
"Collecting sales tax is—or rather should be—simply part of selling online, just as it's part of selling on Main Street," argue the lobbyists, adding "Collecting sales tax? That’s just part of doing business."
Furthermore, the customer must now pay sales tax on every single item they buy while residing in a certain state regardless of where they bought it from. The lobbyists say you should be okay with that because "As a consumer, the sales tax you pay funds projects and services in your community."
Large e-tailers like Wal-Mart, Best Buy, Home Depot, and Target have lobbied for the tax. Of course, they also have brick-and-mortar storefronts, but their online sales have jumped in recent years.
This new regulation tax is precisely how small businesses are regulated out of the brick-and-mortar marketplace. They start with small, seemingly reasonable requests which are sometimes quasi-voluntary like this proposal, then bit by bit the regulations become mandatory and they keep squeezing for more.
The lobbyists for this bill argue it will be good for all businesses. "Thousands of businesses are forced to do business at a competitive disadvantage because they have to collect taxes and online sellers do not, which in some states can mean a 5 to 10% price advantage," they claim.
However, clearly they weren't talking about small online retailers which employs untold millions of workers.
It's dangerous to even open the door to this type of intrusion into the Internet free market. Internet entrepreneurs everywhere should be protesting this law.
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