Strapped state legislatures, hungry for new revenue, are looking to tax ecommerce sites such as Amazon. With new laws in Texas and California recently enacted, Amazon is fighting back by letting go of affiliates in California, filing suit in New York, and threatening distribution centers in Tennessee and Texas. Most recently, Amazon has joined a movement to repeal the California tax through a direct referendum. Yet in the midst of this state-by-state war, a proposal for a national solution has gained steam.
According to the Economist, one problem is that, "America has some 8,000 different sales tax jurisdictions that are constantly changing their rules and are not even aligned with zip codes." The federal Main Street Fairness Act is attempting to solve that problem by streamlining and simplifying state sales tax regulations. It would then make it easy for e-tailers to collect sales tax for multiple states, say supporters, and would address the issue of forcing an ecommerce merchant to figure out how to implement sales taxes for multiple jurisdictions.
Conservative pundit Ramesh Ponnuru offers a different solution. In a Bloomberg column he suggests, "origin-based sales taxes," would be more fair. "A far better solution would be for states to levy sales taxes based on where products are coming from, rather than on where they're going, or for Congress to tell them to do so. Under an origin-based tax rather than a destination-based tax, for example, Washington state would have the power to tax Amazon.com's sales. For physical stores, sales taxes would continue to be collected as before," he says. "This would be a much simpler tax system, with lower compliance costs. It would tend to constrain sales taxes by increasing competition among the states. A state that raised its rates too high would induce businesses, particularly catalog or Internet businesses that can sell remotely, to locate elsewhere." Meanwhile, the issue continues to make national headlines, with no clear cut resolution in sight.
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