TaxNews.com reports this morning that, “commentators and analysts across America have highlighted the impracticalities for e-tailers to collect local sales taxes. Legislators [they say] need to bring forward proposals that are workable.”
According to a study done by the Nelson A. Rockefeller Institute of Government, states have in recent years seen a precipitous decline in sales tax revenues:
[S]ales tax collections were at their lowest levels in 50 years at the end of 2008. Fourth-quarter 2008 sales tax revenue fell by 6.1%, and preliminary figures for the first three months of 2009 suggest even steeper declines.
Joe Henchman, tax counsel at the Tax Foundation, a tax-reform research group in Washington, D.C. advises that there are more than 7,400 state and local tax codes in the US and for retailers complying with the nuances of each will be extremely expensive and burdensome.
Conventional retailers have to keep track of just one tax law at a time, while online retailers would have to keep up with 7,400 different systems. A neutral tax system would have all retailers collect tax on one standard.
With the ever-increasing shift from brick-and-mortar stores to internet based operations it is inevitable that there will be state taxation of interstate commerce at some point in the near future.
The only questions that remain seem to be when and how.
Internet Sales Tax Fairness – New Rules Project
Avoiding an Internet Sales Tax Cartel: Why Congress Must Protect Interstate Commerce & Reject the SST – The Technology Liberation Front