For more than 45 years the states have fought in the courts or on Capitol Hill for the power to force merchants to collect tax for them when the merchant sells something out of state. Back in the day those were catalogue sales, but today those sales are increasingly via the Internet.
The states have been given the same message by Congress, the lower courts and the Supreme Court – twice. That message has been clear – simplify the mess you made of your state tax systems FIRST, and THEN the power you seek can be considered.What did they need to do? End the menagerie of different sales tax rates around a state, set one place for sales taxes to be collected, simplify the list of various rates on similar items, and most of all develop some definitions of items that are translatable from state to state. For example, some states define a candy bar based on the percentage of sugar and tax candy bars at a rate different than a granola bar, and state to state that percentage is different.But for 45 years the states have refused to do the heavy lifting–choosing not to simplify definitions for the most part, but instead have used taxpayer dollars to lobby Congress to raise taxes.And now the state’s tax authorities are at it again, back on Capitol Hill with legislators who willingly ignore the US Constitution, the Supreme Court and the economy. They are looking for legislators willing to pile up yet one more burden on business, particularly small businesses as they would be forced to bear the cost and liability of becoming conscripted tax collectors for remote states. These added costs will take a predictable toll – less hiring and less spending, all within an already disastrous economic context.
They argue that this is a fix to the states’ deficit problems – shifting their responsibility to collect tax by mandating that business do it for them and without compensation for doing so –in essence an unfunded legal mandate on business. The healthy way to generate more revenue is to grow the tax base by attracting more businesses or residents—not by ignoring the Constitution and the Supreme Court, conscripting businesses in other states into the local tax collector cabal.
Big box stores could hardly have crafted a more diabolical plan to drown their smaller competitors in compliance and legal costs which are more easily born by big box stores but which may run main street businesses out of business.
Today’s TechByte was written by Bartlett D. Cleland, Policy Counsel with the Institute for Policy Innovation.