Fairness act is anything but
The Marketplace Fairness Act, which is commonly called the “Internet sales tax” in nongovernment-speak, is anything but fair, and it seems on its very base to be a violation of the Commerce Clause of the U.S. Constitution.
Under the clause, states cannot tax across their borders.
Some try to justify the money grab attempt as a way to deal with a 21st century retail world. However, the construction of freeways, the development of jet and train travel all occurred after the days in which the Constitution was written, and the clause dealt with all of those inventions rather convincingly.
The proposed act, which has made it through the Senate and remains to be considered by the House, aims to get at that pesky multibillion dollar revenue stream – commerce conducted online through online-only retailers or the brick-and-mortar stores with online sales sites.
Currently, it is possible to buy from online retailers without paying any state tax on many goods.
A car bought online still would be subject to state and local taxes upon registration, as would real estate transfers and sales online.
But what about a pair of shoes or a radio or a computer or a camera? There is nothing requiring the seller to charge sales tax except in cases where the retailer has a physical presence. For instance, Amazon charges sales tax in the states where it has distribution facilities.
And do not confuse this act as an attempt to preserve brick-and-mortar stores over the rise of the Internet sales boom.
The Marketplace Fairness Act aims to make the seller collect the taxes due for the state in which the buyer resides. In other words, if a West Virginia resident bought an item from Washington state, West Virginia’s sales tax would be applied by the seller. Physical stores don’t do that now. It is possible to buy items in Pennsylvania, for example, without paying a sales tax due in Ohio or West Virginia.
It would seem the Interstate Commerce Clause was forgotten in the drive to pass the 2013 budget, which includes the misnamed “fairness” act. The clause was meant to give states both power within their own borders over revenue collection and taxation and to prevent states from being predatory in trying to collect taxes across state lines.
The idea of charging a tax on Internet sales based on the location of the buyer would seem to toss the clause out the window. What would prevent brick-and-mortar retailers from being pushed to collect taxes based on the residency of physical purchasers right in the store?
The technology exists whereby a retailer could, by asking for the buyer’s ZIP code, input the sale into a database that would calculate the tax based on the sales tax rates where the buyer lives. That means not only West Virginia state tax but also any county sales taxes also could apply.
The nightmare would be in seeing how a small business would deal with all of this, either by being forced to buy into a service that runs such a database, or by employing a squadron of accountants.
But that clearly was prohibited by the Interstate Commerce Clause at the foundation of the nation, and through numerous interpretations over the years, including interpretations made as travel became easier among the states.
The Marketplace Fairness Act deserves a quick death in the House.