FC: More on Senate voting soon on Sen. Mike Enzi's Net-tax bill

[Declan McCullagh <declan () well com>]

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Date: 10 Nov 2001 00:52:58 -0500
From: "John R Levine" <johnl () iecc com>
To: "Declan McCullagh" <declan () well com>
Subject: Re: FC: Senate may vote this week on Sen. Mike Enzi's pro-Net-tax
 bill
In-Reply-To: <20011108132547.A2512 () cluebot com>

>    The bill, championed by Sen. Mike Enzi (R-Wyoming), abandons Capitol
>    Hill's hands-off approach to online taxation: It would usher in a
>    cavalcade of levies on mail order and Internet purchases.

I don't think that's a fair characterization of the bill.  I wear three
hats here.  One is that I'm a techoid weenie with a T1 running into my
back bedroom, who orders a lot of stuff online and loves low prices.  I
also run a a small on-line book store, and my sister runs greattapes.com
where she hawks Disney-free kids videos.  And I'm on my local municipal
board (that's how I get to be the sewer commissioner.)

Wearing my online commerce hat, I think it stinks that I'm at a price
disadvantage compared to out of state competitors.  (Of course, it stinks
equally for people in other states that have to compete with me.)  I'd
have no objection in principle to collecting tax on all sales, since I do
it for N.Y. sales already, but in practice it's a huge pain to track the
80 tax jurisdictions in N.Y. and it'd be impossible to track and remit tax
to all 17,000 nationwide.  (This administrative burden was a major factor
in the Supreme Court's decision in Quill v. North Dakota saying that N.D.
couldn't collect tax on out-of-state mail orders.)

On-line stores have done some amazingly stupid things in their desire to
avoid sales tax "nexus", notably if you ordered books from Borders or B&N
on-line, you couldn't return them at a store because the online and
physical stores were legally separate companies.  They finally gave up on
that when they realized that they weren't going to make money on people
who were that price sensitive anyway, and getting people in the stores is
a good thing, because people who are physically standing in your store at
the return counter are much more likely to buy something else than people
standing in line at the post office to mail something back to the
warehouse.  That's not an issue for smaller businesses that have only one
location, but it still provides perverse incentives to buyers to send
their money as far away as possible and to enrich UPS and Fedex to avoid
the tax man.

Wearing my municipal hat, we get about half of the village's revenue from
sales tax and the rest from property tax.  The fact that people mail
ordering from out of state don't pay sales tax means that the tax burden
falls disproportionately on local businesses and particularly on local
property tax, which is a much less fair tax than sales tax.

Our sales tax money pays for the cops and the fire trucks and street
paving and snow plowing, all activities that seem pretty popular with the
voters.  (It doesn't pay my salary, I don't get one.)  If we got more
sales tax revenue, we would lower the property tax rate.  We love cutting
taxes.  It makes people happy and gets us reelected.  In the current
economic climate, I doubt we'll be cutting a lot of taxes, since people
like laying off policemen even less than they like paying taxes, but it
might let us avoid raising property taxes.

This bill has three complicated-looking sections about state sales taxes,
but they're about getting the 17,000 tax jurisdictions down to a
reasonable number that vendors can collect without spending a hundred
grand on a tax compliance system.  None of it is about new taxes.  States
with no tax will still have no tax, but states that do will have a single
averaged tax rate for mail and online orders.  For us really small
businesses, it has no effect at all since it specifically exempts
businesses that do less than $5M/yr.

Unless you're blindly opposed to all taxes and believe that the Firetruck
Faeries will magically come if your house catches on fire, this is a quite
reasonable bill to move toward a tax system that treats all sales the
same, and will make debates about sales tax rates a lot more honest.

Regards,
John Levine, johnl () iecc com, Primary Perpetrator of "The Internet for Dummies",
Information Superhighwayman wanna-be, http://iecc.com/johnl, Sewer Commissioner
Write for PGP key, f'print = 3A 5B D0 3F D9 A0 6A A4  2D AC 1E 9E A6 36 A3 47

PS:

>    Congress had previously banned states from collecting Net taxes, but
>    the temporary moratorium expired on Oct. 21.

Yes, and this bill specifically extends that moratorium, and forbids any
taxes on internet access or electronic commerce.




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