In today’s Wall Street Journal, retired accountant Raymond L. Dever proposes to “level the playing field” among retailers by shifting the burden of tax collection to the States. Dever’s argument in favor of his proposal also explains why Congress is unlikely to adopt it. And by “leveling the playing field” this way, it would unlevel it in others.
The bill’s proponents want to level the competitive playing field for local retailers. Opponents argue that it’s unfair and maybe impossible to burden Internet retailers with the job of complying with the rules of thousands of state, county and local tax jurisdictions.
I’ll leave it to others to debate the merits of taxing Internet sales. But I do have a suggestion that could lift a lot of the burden from the shoulders of online retailers.
My suggestion: Have each state designate one agency to receive a once-a-year online submission from each Internet retailer that lists the name and address of every person who made a purchase in that state, the item purchased, and the amount of the purchase. After that submission, the Internet retailer is done.
Under Dever’s proposal, online retailers would no longer be unpaid tax collectors for the States. That responsibility would reside with the States.
Dever calls this a “simpler” Internet sales tax, but it raises the question: simpler for whom? Governments at all levels are accustomed to shifting to others the burden of tax collection. That’s true for sales taxes already collected as well as payroll taxes, excise taxes, income tax withholding, and countless other taxes. There is no question that this arrangement is much simpler for governments at every level. Why would the States even consider Dever’s proposal, much less agree to it?
Even if they did agree to it, the result would be to unlevel the playing field other ways. Most obviously, brick-and-mortar retailers would still collect sales taxes on behalf of State and local governments. Less obviously, it would treat Internet retailers differently (and more favorably) than every other entity that must collect taxes on behalf of the government.