By a vote of 69-27, the United States Senate has passed yet another tax hike. Instead of curbing spending, they have decided that raising taxes on the Internet is the best way to pay the debt.
The bill aims to enforce a sales and use tax on businesses that rely on the Internet to reach their customers. While the specifics of the bill are about as long as Obamacare, here are the top three problems with the Internet sales tax:
• Online businesses would be responsible for collecting and filing their sales tax from customers that don’t reside in their state.
• Businesses would be forced to use software that will generate a database to keep track of their tax paying customers. This also puts their customers at risk should the database be hacked, spilling millions of sensitive personal information records into the wrong hands.
• States might no longer seek to lower their taxes for business friendly environments. They’d be encouraged to raise their taxes in order to collect tax money from other states, thus hurting potential business development.
If you’re scratching your head wondering how the Senate has managed to support a bill that could put a halt to business development, increase taxes, and further regulate our last free market, the Internet, we are too.
This is a poorly written bill whose future consequences have not been thoroughly thought out yet. We are disappointed that the Senate and the people we have elected to represent us would consider such a poorly thought out piece of legislation.
Now retailers who are not in a brick and mortar situation will have to be able to figure out, for each taxing jurisdiction (city, county, state, etc.) what is subject to sales tax and what the rate is. There are currently 466 different taxing jurisdictions with sales taxes. They do not have a common definition as to what is taxable or how to remit the funds.
Looking at fairness, the brick and mortar store collect sales tax where there store is located and if they ship it out of that jurisdiction they do collect sales tax. In fact some retailers encourage people to buy in one place and ship it to ta tax free jurisdiction so they don’t have to pay sales tax.
In my opinion, let the states collect their own Use Tax and leave the entrepreneurs alone to create businesses and generate income.
An Enrolled Agent and U.S. Tax Court Practitioner, I represent taxpayers in front of the IRS and the U.S. Tax Court on self-prepared tax returns and tax returns prepared by other tax preparers. I handle CDP hearings, collection cases and contested issues in IRS audits. With more than three decades of experience working with small individual returns to large, multi-company and multinational companies returns I have a broad breadth of experience and am in the position to help you.
As an Approved Continuing Education Provider, I am available to speak to organizations throughout the United States on Tax and Tax Research issues.
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