Tags: peter morici | internet | sales | tax

Morici: Far From a Perfect Solution, It's Time to Start Taxing Internet Sales

By    |   Tuesday, 07 May 2013 01:40 PM

Internet retailers should collect sales taxes to correct a situation that is both unfair and bad economic policy, according to Peter Morici, a professor of international business at the University of Maryland.

The Senate sided with traditional retailers and financially strapped state and local governments by passing legislation that would widely subject online shopping, for many tax-free, to state sales taxes.

The Senate passed the bill 69-27, receiving bi-partisan support. Opposition from some conservatives viewing it as a tax increase will make it a tougher sell in the House of Representatives. President Barack Obama supports the proposal.

Editor's Note: Tiny Loophole Found in 70,320 Page IRS Tax Code Could Pay $87,500


The University of Maryland professor, in a posting to his Twitter account, wrote that in 1992, the Supreme Court held that states did not have the power to levy taxes on online sales, unless the retailer has a physical presence in their state.

"Large retailers, like LL Bean, routinely charge the appropriate state taxes where they have a store or warehouse, but not on sales in states where they do not," he wrote.

Main Street retailers complain, Morici wrote, this places them at an unfair disadvantage and they are absolutely correct.

"No business would like the government giving a 5 percent price advantage to out-of-state competitors," Morici wrote.

The measure, however, would not prove to be a salvation for small retailers.

"Most local retailers, competing with Internet businesses and big-box stores, lack the scale to offer the variety of products an increasingly diverse American population demands, and the scale to get favorable prices at wholesale," Morici wrote.

"The online bookstore in Tuscaloosa is much less menacing to the small bookstore in Boston than Amazon.com. However, the Senate bill would drive out the Alabama retailer and enlarge giants like Amazon.com."

Morici wrote that Amazon could handle these issues much as Xerox handles employee payroll taxes all across the country. Its small competitors could not.

"Paying sales taxes in all 50 states adds to its costs, but the benefits to its bottom line of driving out small competitors easily makes up the difference — with a big profit," he wrote.

The Senate bill excludes retailers with annual sales of less than $1 million, "but that is a pittance in retailing, and bears no parallel to definitions of small business in other federal legislation."

Morici added that, "although it is far from a perfect solution, raising the threshold for retailers that must collect sales taxes outside their jurisdiction to $10 million would do a lot to … preserve small businesses, including brick-and-mortar retailers, than requiring virtually all retailers to comply."

Rep. Steve Womack, R-Ark., the bill's main sponsor in the House, told the Associated Press that "obviously there's a lot of consumers out there that have been accustomed to not having to pay any taxes, believing that they don't have to pay any taxes."
 
"I totally understand that, and I think a lot of our members understand that. There's a lot of political difficulty getting through the fog of it looking like a tax increase."

Editor's Note: Tiny Loophole Found in 70,320 Page IRS Tax Code Could Pay $87,500

© 2017 Newsmax Finance. All rights reserved.

 
1Like our page
2Share
Economy
Internet retailers should collect sales taxes to correct a situation that is both unfair and bad economic policy, according to Peter Morici, a professor of international business at the University of Maryland.
peter morici,internet,sales,tax
526
2013-40-07
Tuesday, 07 May 2013 01:40 PM
Newsmax Inc.
 

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

NEWSMAX.COM
MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved