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The us government should put tax on internet sales

It's good news for consumers.

Internet Sales Tax: A 50-State Guide to State Laws

It will ultimately lead to a fairer and more rational tax system, even if it means missing out on deals from time to time.

South Dakota is a "great victory for consumers and retailers. In pre-internet times, there was a certain logic to this: Offline tax collection was complex and burdensome — especially since sales tax is often levied not just by states but by municipalities — and consumers did the vast majority of their shopping at brick-and-mortar stores anyway.

But as online retail proliferated and technology made tax compliance somewhat simpler, these decisions created an odd and growing tax loophole: Shop at your corner store and you had to pay sales tax; buy online, and you often could avoid it.

You've never paid it, have you? So as online retail has grown, states have sought increasingly clever ways to force out-of-state sellers to collect sales tax where they know their own residents are unlikely to pay use tax.

Ohio has even asserted that online retailers have a "presence" in the state that obligates them to collect taxes if they put cookies on their customers' computers. This claim has been tied up in court.

Meanwhile, the biggest players like Amazon have had little choice but to establish true physical presences warehouses and such and start collecting tax in all or virtually all states.

But big gaps remained — for example, Amazon collected tax on its own sales but generally not on third-party sales through its marketplace. The whole system became a messy patchwork.

States may now require sellers to collect and remit sales tax, regardless of physical presence, so long as the states take certain steps to minimize the burden of compliance on out-of-state sellers.

The Supreme Court decision that will put more taxes on internet sales is good news for you

This really is a win for consumers and most retailers I get it: You liked not having to pay sales tax on some of the things you bought. But random loopholes are not the hallmark of a good tax code. A sales tax is supposed to be a broad tax on consumption: You buy and use things, you pay tax.

Learn the rules for your state about paying sales tax on Internet sales.

When you create a way for people to avoid the tax, you distort their behavior pushing them to buy online when they might otherwise buy in a store and you reduce tax collections. That means the government either has to cut back on services or it has to raise taxes on something else.

Since 1970s, sales tax rates have gone up by a couple of points on average around the country, but sales tax collections have stayed about flat as a share of the economy.

This court decision will create a fairer playing field for retailers and make it easier for governments to continue financing themselves effectively through sales tax. The decision does not create a free-for-all for states Because of the Commerce Clause of the US Constitution, states are still subject to a requirement not to discriminate against or unduly burden out-of-state sellers.

For example, South Dakota makes software available to out-of-state retailers, for free, to help them comply with its sales tax. And it is a member of the Streamlined Sales and Use Tax Agreement SSTAan interstate compact under which 21 states have agreed to adopt uniform rules about various aspects of their sales taxes.

Only about half of states that levy sales tax are currently parties to the SSTA. Large states, in particular, have been reluctant to join, in part because of the flexibility they must give up in customizing their sales tax rules. But the promise of additional revenue from online sales taxes may push more states to join. That would go a significant distance toward closing a budget gap of a few percentage points.

And, as more sales move online, the impact of closing the loophole will grow. This decision can make our tax system a little less broken It is important for a tax system to be adequate — that is, revenues should grow on pace with the economy, so the government can keep pace with the demand for services as the economy grows.

Over the decades, states have faced growing problems with tax adequacy. Sales taxes have suffered base erosion, as I discussed above.

  1. Shop at your corner store and you had to pay sales tax; buy online, and you often could avoid it.
  2. Taxpayers have revolted against increases in this inflexible tax, voting to impose caps that have in some states kept revenue growth well below economic growth. This court decision makes it possible for states to raise somewhat more sales tax revenue without raising tax rates — an outcome that should be good for the economy and good for people who rely on services from state governments, which is all of us.
  3. Offline tax collection was complex and burdensome — especially since sales tax is often levied not just by states but by municipalities — and consumers did the vast majority of their shopping at brick-and-mortar stores anyway.
  4. In pre-internet times, there was a certain logic to this.
  5. Offline tax collection was complex and burdensome — especially since sales tax is often levied not just by states but by municipalities — and consumers did the vast majority of their shopping at brick-and-mortar stores anyway. This decision can make our tax system a little less broken It is important for a tax system to be adequate — that is, revenues should grow on pace with the economy, so the government can keep pace with the demand for services as the economy grows.

Property taxes have come under major political pressure: Taxpayers have revolted against increases in this inflexible tax, voting to impose caps that have in some states kept revenue growth well below economic growth. These pressures have pushed states in two main directions: Income taxes can be more progressive, but they also hurt the economy as rates rise, and income tax revenue volatility in recessions has worsened the severity of state budget crises.

This court decision makes it possible for states to raise somewhat more sales tax revenue without raising tax rates — an outcome that should be good for the economy and good for people who rely on services from state governments, which is all of us. I worked at the Tax Foundation from 2008 to 2009.