Internet commerce and current tax code
Internet commerce and the complexitiesof complying with state sales and use tax laws When a citizen of a state purchases goods from a vendor out of the state, usually they do not pay any sales tax to either state involved. Until fairly recently in our nations history, these transactions were made through catalog vendors and represented such a small amount of lost tax revenue that state tax agencies were not concerned enough to take any action. The addition of reliable and trustworthy electronic commerce (e-commerce) technologies in the late 1990's changed the equation somewhat. Now the volume potential of interstate retail transactions has the potential to rival the traditional "brick and mortar" retail channels. The combination of growing market share for e-commerce companies and cooling economic conditions has many states worried about sales tax income. This has most state taxing authorities asking how, if at all, e-commerce transactions should be taxed? There is much debate on this topic among tax officials, attorneys, lawmakers, and both e-commerce and traditional retailers. In my opinion, E-commerce transactions should be taxed as any other interstate retail transaction. To ensure the proper collection of sales
To illustrate the complexity involved in even the most seemingly innocuous transaction take the example of selling fur trimmed gloves in the states of Connecticut, Massachusetts, Minnesota, New Jersey, New York, Pennsylvania, Rhode Island, and Vermont. 625) Not only does it seem that collecting from the buyer would be impractical, but would also dramatically increase the pain citizen's experience over taxes. Let's put the significant challenge of companies determining which states that they need to collect sales tax for aside for a moment and examine the complexities involved in determining which specific transactions are taxable and by how much. North Dakota Department of Revenue (1992), Mauro (2000) says that the decision in this case "paves the way for Congress to regulate commerce by enacting laws under the commerce clause since the due process requirement was satisfied. So collecting sales taxes from citizens directly would not only be immensely unpopular, but a practical impossibility as well. 11) These third parties could help the state governments and retailers manage the tax collection process and could be traditional payment service companies "with well established global reach, such as credit card companies, expand[ing] into the new business of collecting and distributing VAT receipts. Legislation that would set guidelines for state sales and use taxes but leave rate determination up to each state would make the system manageable for retailers without infringing on states rights. A state tax agencies only chance to collect sales tax on transactions that originate out of state is to prove nexus, and require the selling company to collect or pay the tax owed. 626) States are far too dependant upon the revenue generated by sales and use taxes to allow e-commerce transactions any exemptions. 13) The Advisory Commission on Electronic Commerce proposed that Congress "encourage state and local governments to adopt a uniform sales and use tax act. This act was renewed in 2000 and again in 2003. State governments must be able to reliably collect taxes without bearing the burden of a collection system that costs more to operate than it collects. At the same time, it is logistically impossible for small and medium sized businesses to develop systems that could manage the seemingly infinite number of tax code permutations that exist in our states.
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Acceptance Essays
