Senate Internet sales tax bill a tough sale in House


WASHINGTON, May 7, 2013 — The stock market continues to levitate this morning for no known reason except perhaps for the Fed’s policy of QU (quantitative easing) forever. Tossing a few billion to Wall Street’s 1% every day keeps ‘em happy and trading away, even if everyone else has left the room after selling in May. (Or have they?) We can no longer figure this out, but when it ends (and the charts say soon), it won’t be pretty.

Meanwhile, back at the ranch in DC, the Senate’s up to its old tricks, apparently, passing yet another outrageous money grab that’s likely DOA in the House. One way or another, Harry Reid and all the little Obamacrats remain less interested in encouraging business than they are in squeezing tax blood out of the increasing pile of stone strewn across the country.

The latest charade—named the ‪”Marketplace Fairness Act of 2013” aims to tax the bejeebers out of every mom and pop eking out a living via Internet businesses while ginning up a ton of paperwork for them to fill out as well. As we’ve often said in this column, whenever a Democrat says “fairness,” you’d better check your wallet, ASAP. The bill actually passed in the Senate by a vote of 69 to 27 on Monday, proving that there are more “low information” Republicans in the Senate than we’d initially imagined.

Just to make things less palatable in the House, Reid managed to slip in a provision allowing every Indian tribe in the country to levy its own tax on Internet transactions as well, typical without telling the Republicans. If the House was already to gag on this unpalatable legislative slop, it sure will now. At which point, Reid and the White House phalanx of Alinskyites will point their collective fingers at those mean-spirited, Indian-hating Republicans. This nonsense would be pretty funny right now except for all the voters who actually buy into all this nonsense.

The “fairness” bill, should it pass, empowers states to collect sales taxes from Internet purchases. Under the bill, states could require out-of-state retailers to collect sales taxes when they sell products over the Internet, in catalogs, and through radio and TV ads. The sales taxes would be sent to the states where a shopper lives.

Current law says states can only require retailers to collect sales taxes if the merchant has a physical presence in the state.

That means big retailers with stores all over the country like Wal-Mart, Best Buy and Target collect sales taxes when they sell goods over the Internet. But online retailers like eBay and Amazon don’t have to collect sales taxes, except in states where they have offices or distribution centers.

“This bill is about fairness” [there’s that word again], said Sen. Mike Enzi, R-Wyo., the bill’s main sponsor in the Senate. “It’s about leveling the playing field between the brick and mortar and online companies and it’s about collecting a tax that’s already due. It’s not about raising taxes.” Huh? If the tax were “already due,” states and the IRS would already be holding mom and pop hostage.

Pols in both parties don’t even know when they’re lying anymore. ‘Twould be interesting to see which brick and mortar companies put Enzi up to this. It surely wasn’t the work of his rock-ribbed conservative Wyoming constituents.

House leaders, at least, seem to see this ploy for what it is: a tax increase. (Note to Senator Enzi). Grover Norquist, the anti-tax advocate, and the conservative Heritage Foundation oppose the bill, and many Republicans have been wary of crossing them.

“Obviously there’s a lot of consumers out there that have been accustomed to not having to pay any taxes, believing that they don’t have to pay any taxes,” said Rep. Steve Womack, R-Ark., the bill’s main sponsor in the House. “I totally understand that, and I think a lot of our members understand that. There’s a lot of political difficulty getting through the fog of it looking like a tax increase.” Hey, Senator Steve, what’s your party affiliation again?

On Tuesday, House Speaker John Boehner, R-Ohio, declined to say whether the House would take up the bill, deferring to the House Judiciary Committee, which has jurisdiction over the legislation. Committee Chairman Bob Goodlatte, R-Va., said there are problems with the bill but he did not reject it outright.

“While it attempts to make tax collection simpler, it still has a long way to go,” Goodlatte said in a statement. Without more uniformity in the bill, he said, “businesses would still be forced to wade through potentially hundreds of tax rates and a host of different tax codes and definitions.” Yep, that’s the point, isn’t it? Endless, unremunerated paperwork in addition to the tax. This is the kind of stuff that crushes small businesses, forcing them to increase uncompensated time.

Goodlatte said he’s “open to considering legislation concerning this topic but these issues, along with others, would certainly have to be addressed.”

Internet giant eBay led the fight against the bill in the Senate, along with lawmakers from states with no sales tax and several prominent anti-tax groups. The bill’s opponents say it would put an expensive obligation on small businesses because they are not as equipped as national merchandisers to collect and remit sales taxes at the multitude of state rates.

Businesses with less than $1 million in online sales would be exempt. EBay wants to exempt businesses with up to $10 million in sales or fewer than 50 employees.

“The contentious debate in the Senate shows that a lot more work needs to be done to get the Internet sales tax issue right, including ensuring that small businesses using the Internet are protected from new burdens that harm their ability to compete and grow,” said Brian Bieron, eBay’s senior director of global public policy. EBay’s on the right track here. But another fly in the ointment is the fact that small businesses would also likely have to fill out plenty of paperwork anyway to prove they were earning less than the threshold. That, or endure closer scrutiny from the IRS.

Some states have sales taxes as high as 7 percent, plus city and county taxes that can push the combined rate even higher.

AP notes that “states lost a total of $23 billion last year because they couldn’t collect taxes on out-of-state sales, according to a study done for the National Conference of State Legislatures, which has lobbied for the bill. About half of that was lost from Internet sales; half from purchases made through catalogs, mail orders and telephone orders, the study said.”

What AP and the MSM always fail to note here is that governments never “lose” X dollars of taxes since they never had those dollars to begin with. If governments today actually “earned” those taxes by delivering goods and services to the public, that might be another story. But they waste a substantial portion of the money we send them anyway, either due to bloated bureaucracies, over-remunerated public union employees, or both. Let’s see what governments can do to cut costs, unneeded personnel, and gold-plated benefits before we listen to arguments citing all the taxes they’ve “lost.”

Supporters of the bill argue back, claiming the bill makes it relatively easy for Internet retailers to comply. States must provide free computer software to help retailers calculate sales taxes, based on where shoppers live. States must also establish a single entity to receive Internet sales tax revenue, so retailers don’t have to send it to individual counties or cities. Ah, but what about all those Indian tribes Harry Reid slipped into the bill? Nobody’s saying.

Opponents worry the bill would give states too much power to reach across state lines to enforce their tax laws. States could audit out-of-state businesses, impose liens on their property and, ultimately, sue them in state court. And that’s just the point of our commentary today. When it comes to today’s bloated, imperial, and elitist Federal and state governments, the rule is this: if they can do it, they will do it.

     –AP contributed to this report


Disclaimer: The author of this column maintains several active trading and investment portfolios and owns residential and investment real estate. He intends to nibble on the preferred stocks mentioned above as the occasion warrants.

Positions mentioned above describe this author’s own investment decisions and should not be construed as either buy or sell recommendations. The current market is highly treacherous and all investors travel at their own risk, so caution should be exercised at all times.

Illustrations, charts, commentary, and analysis are only the author’s view of current or historical market activity and don’t constitute a recommendation to buy or sell any security or contract. Views, indications, and analysis aren’t necessarily predictive of any future market or government action. Rather they indicate the author’s opinion as to a range of possibilities that may occur going forward.

References to other reporters, analysts, pundits, or commentators are illustrative only and do not necessarily represent an endorsement of such individuals’ points of view. If specific investment vehicles are mentioned in any article under this column heading, the author will always fully disclose any active or contemplated investments in said vehicles.

Follow Terry on Twitter @terryp17


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Terry Ponick
Biographical Note: Dateline Award-winning music and theater critic for The Connection Newspapers and the Reston-Fairfax Times, Terry was the music critic for the Washington Times print edition (1994-2010) and online Communities (2010-2014). Since 2014, he has been the Business and Entertainment Editor for Communities Digital News (CDN). A former stockbroker and a writer and editor with many interests, he served as editor under contract from the White House Office of Science and Technology Policy (OSTP) and continues to write on science and business topics. He is a graduate of Georgetown University (BA, MA) and the University of South Carolina where he was awarded a Ph.D. in English and American Literature and co-founded one of the earliest Writing Labs in the country. Twitter: @terryp17