The Sun News on Wednesday presented interesting pros and cons whether Congress should enact legislation to allow state and local jurisdictions to require remote vendors to collect and remit use taxes. I believe the pro article by Matthew Shay presented a much better argument than did the con article by Michael Greve.
Greve contends that it is up to the taxing jurisdiction to collect the tax directly from the purchaser and that it would be burdensome to require internet vendors to keep track of the large number of state and local requirements. He further introduces an absurd comparison to a hypothetical requirement that they also collect for foreign countries. His bakery comparison is equally ridiculous. Under current law, a local vendor who delivers into a different local jurisdiction within the same state is required to collect the tax for that jurisdiction. No similar requirement exists for a customer, resident of another jurisdiction, who makes an in-store purchase.
More than 50 years ago, major mail order merchants such as Sears, Montgomery Ward and J. C. Penney were collecting state and local use taxes on their interstate sales. I know this is true because I managed sales and use tax compliance for Sears in its 10 southeastern states. We did it without the sophisticated computer equipment and software that is available now.
Although Montgomery Ward is gone and Sears withdrew from the catalog mail order business, they have been replaced by a new crop such as Walmart, Office Depot, Best Buy and many others who collect and remit the tax on their internet sales.
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At the beginning of World War II our national government recognized that tax compliance would be greatly improved by collecting taxes from the source, and enacted income tax withholding. States recognized the importance of collecting at the source when they enacted modern sales and use tax laws and provided that the tax be collected at the time of sale by the vendor.
This worked well as long as most sales were made locally or remotely by a vendor who was subject to the jurisdiction of the state on account of having business locations within the state. Now we have major internet vendors who seek a competitive advantage by avoiding tax collection, even demanding to be favored over their competitors by seeking exclusion from collecting tax as the price the state must pay to avoid the vendor’s withdrawing a planned instate distribution center.
This practice is depriving the state of revenue that it would have gotten had the retail business not moved so quickly to the internet. In fairness, Congress should enact remedial legislation to make the playing field again level.
The writer lives in Pawleys Island.