Over the past few months, several states have been pushing legislation designed to tax online businesses. While online companies already pay state sales taxes to the state of their headquarters, The Main Street Fairness Act, as named by Illinois Senator Dick Durbin (D), proposes to collect taxes on all purchases made in states that have company affiliates.
For example, companies like Amazon.com with affiliates in Illinois, which already has the Fairness Act in effect, will experience tax for all sales to Illinois residents. Amazon severed its ties with affiliates in Illinois immediately after the bill, to escape the effects of the law.
Many fear that the effects of this bill nationwide will cause some companies to leave the United States, thus removing jobs from the company. Others are worried that the tax will decrease spending and destroy online retailers.
Proponents of the tax argue that tax-free online sales give an unfair advantage to Internet retailers that don't maintain operations in every state. And with some retail businesses closing down their brick-and-mortar locations but continuing online sales, states are looking for ways like this to retain any revenue possible.
I'm by no means a member or supporter of the Tea Party Movement. In fact, I support taxes in most cases. But this bill poses some problems that are a bit more alarming than simply paying another sales tax.
Think about the pros and cons of shopping online versus in a store. In a store, you get to test and touch merchandise, you have the item in your possession as soon as you buy it, and you can easily return it by going back to the store. Online, you have many resources for research and comparison (although those with smartphones have these in stores as well), but you have to pay for shipping, wait for the product to ship, and deal with the hassle of return-shipping if something is broken.
Consider how the added sales tax will affect people's shopping habits. There would be no benefit to shopping online unless online vendors had extremely low prices. Otherwise, you're pretty much paying the same price or more to have something shipped to your home instead of having it immediately once you leave a store.
Online retailers would also have to use more resources to simply comply with the bill. Online companies would be flooded with significant paperwork and periodic audits regarding all the new taxes from each state; this might be enough to make online retail simply out of the question for small or up-and-coming businesses.
While this proposed bill is aimed at providing fairness for small local business, its biggest supporters and lobbyers are paid by huge brick-and-mortar retailers like Wal-Mart. This is yet another reason to question who this bill will really help and whether it's worth the amount of businesses it may significantly hurt.
The bill has some time before it's in any position to come into effect, but in the meantime, I suggest people get their online shopping out of the way.