A Modest Proposal on Online Stores and Taxes
If sales made online must be taxed (and I don’t see that as a horrible thing), we immediately run into the issue of whatever business is handling a transaction suddenly is looking at tracking compliance with taxing regulations for thousands of political entities, depending on where their customer happens to be residing. I heard on NPR this morning that a proposed fix is legislation that would force some consistency in tax policy from the federal level.
This seems overwrought. A business with a physical storefront pays taxes based on the storefront’s location. This makes sense; this is the locality where the business relies on public services and infrastructure for its operation, and the tax revenues help pay for the cost of those services and infrastructure. That the customer is also likely to be a resident of the locality is incidental, and when a customer who isn’t a resident of that locality crosses the transom, there isn’t a consultation of tax law for the customer’s actual place of residence in order to determine the tax they pay on a purchase.
How about doing exactly the same thing for online businesses? It seems to me that it would simplify things immensely if a business that accepts orders online would simply charge the tax applicable at the location that the order is received, or if that is not within the USA, whatever USA address the business claims as its organizational presence in the US. Maybe there is slightly more complexity for mega-businesses like Amazon, but Amazon is already tracking the collection of taxes when someone orders merchandise from a state where Amazon has a physical presence, showing that this is feasible and has been done. This approach ought to motivate local political entities to reduce barriers to operation of online businesses within their boundaries, and perhaps even to encourage building out public broadband infrastructure to accommodate both business and personal use.
No babies were eaten in the drafting of this blog post, Mr. Swift.