(LOS ANGELES TIMES) — The U.S. Senate is expected to vote next month on a bill that could require online retailers to collect sales taxes from customers in every state that imposes them. The measure has been bashed by opponents as a tax increase that would cripple small Web businesses. It’s not, and it won’t. Instead, the Marketplace Fairness Act would eliminate an outdated restriction that favors those who can shop online over those who can’t or won’t. That’s reason enough for it to become law.
For much of the last two decades, Internet retailers collected sales taxes only from customers in the states where they were headquartered or had employees. They based that approach on a 1992 Supreme Court decision that barred states from requiring retailers with no physical presence there to collect sales taxes for them. Such a requirement, the court reasoned in Quill Corp. vs. North Dakota, would unacceptably impede interstate commerce.
The point that’s often missed here is that the tax is owed by buyers, not sellers. And even with the Quill ruling, most states still required residents to pay taxes on out-of-state purchases as part of their annual tax returns. But the ruling made it extremely difficult for states to enforce that requirement, and not surprisingly, few people complied. Now, anyone with an Internet connection and a credit card can buy goods “out of state” without paying the tax they owe.