Should Internet Taxes be a Federal Issue?

Before you roll your eyes at me, I’m not going to use this post to newsjack Cyber Monday. For your information, I have an online shopping addiction all year round.

The Supreme Court decided against hearing the case for a New York state law that requires online retailers to collect a sales tax. The law was implemented in 2008 and has been challenged by Amazon and Overstock.com.

shutterstock_103906970The two Internet retail giants have failed to get the Supreme Court to review and overturn the law in one of many state governments they’re fighting across the country. NBC summed up the current state of Internet taxes perfectly:

With Congress not taking action on the issue, courts have been intervening case by case in a long-running struggle between state governments and major online retailers… Seattle-based Amazon has been fighting one-on-one battles with the 50 states for years over sales tax.

This isn’t the first time we’ve covered Internet tax law on CopyPressed. The Marketplace Fairness Act was reintroduced to Congress in February 2013 and passed in the Senate in May. Even in its most basic terms, the bill still has multiple “if-then” scenarios that vary state by state.

The MFA needs multiple answers to determine who should get taxed. What state did the consumer buy the product from? What state is the product shipping to/from? Does the Internet retailer have a physical building in the state? Does the state have an Internet tax law?

In theory, Internet tax laws help brick and mortar businesses as well as the residents of the states that enact them. The Marketplace Fairness Act for example would tax out -of-state purchases but not in-state ones. A business with a building in Colorado would tax consumers buying their products from Tuscan, but not consumers from Denver. The Colorado government gets tax revenue without having to draw from the pockets of its citizens.

shutterstock_135889718This might be good for small online retailers, but what about a company like Amazon that has buildings all over the country? In 2013 Amazon has announced mass hirings, same-day delivery plans, and even drones that could deliver packages. Massive retailers want the Supreme Court to look into Internet taxes so they don’t have to figure out 50 different state tax laws. (Side note: they also don’t want taxes on Internet products to begin with.)

The Marketplace Fairness Act is just one example of an Internet sales tax. The Mainstreet Fairness Bill was rejected by the Illinois courts in September. It proposed a tax on products sold through affiliates, or bloggers that advertised products and linked to their pages. While this program was nicknamed the “Amazon Sales Tax” because of Amazon’s affiliate program, it hurt local bloggers when the big companies just dropped their programs in states that implemented the tax.

Let’s revisit the question I posed in the headline: should Internet taxes be different in each state or should they be regulated federally? The Wall Street Journal said that states all across the country have had different rulings about Internet taxes. Wouldn’t it be easier if everyone was on the same page? Would that hurt some states more than others?

About the author

Amanda Dodge