On Tuesday, a Federal judge in Colorado struck down the 2010 Colorado “Amazon Tax.” This tax, so-named for Internet Superstore Amazon.com, required online stores to collect sales tax from consumers in Colorado.
The point of these taxes is to both raise revenue for the states that enact them and to supposedly “level the playing field” of brick and mortar stores in the state. The truth, according to Providence Business News, is that Internet sales tax don’t generate enough revenue.
More importantly is the assumption that the state government is somehow “losing money.” The government has no money of its own, only the money of its residents. So when the state talks about “losing” money what it really means is that the consumers of the state were able to keep more of their money for themselves. Apparently states hate this because several states have enacted Internet sales tax laws similar to the one in Colorado.
Though the Amazon Tax eliminated in Colorado, the idea of it is far from dead. With states scrambling for more revenue streams, taxing Internet sales looks promising. Businesses that are losing revenue to online merchants are in favor of taxing Internet sales as a way of leveling the playing field. This will not take place on a state by state basis, there is bi-partisan support for a federal compact that would have online retailers extracting the prevailing sales tax of a particular state or even a set federal sales tax rate.
An article by David Harsanyi reveals in an article on this matter that The National Conference of State Legislatures claims that legislation would “enhance state sovereignty.” He anticipates that collecting Internet sales tax will go Federal.
One essential problem with Internet sales tax being used to supposedly level the playing field is that this isn’t possible. Online stores do not have the same overhead as a traditional physical store. That alone is often the difference between success and failure in the retail world.
What should happen is that the market should dictate who succeeds and who fails. With more than 9 percent unemployment and an economy in crisis, the U.S. government shouldn’t put obstacles such as the Amazon Tax in the way of businesses, it should get out-of-the-way.