Internet Sales Taxes: Just in Time for Christmas?

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A U.S. House committee today is hearing the pros and cons of a bill that would finally allow states to collect sales taxes on stuff bought online. The states desperately need the money. Sales taxes account for a third of all state revenue, and the bulk of it goes towards public education, but that tax base is eroding thanks to a proliferation of online sales outlets. One study estimates that by 2008, the states will be losing $33 billion in revenue on “remote” sales, $18 billion of which comes from virtual stores.

Internet retailers have successfully batted down such proposals in the past, arguing that they would infringe on interstate commerce. But the states have gotten smarter and in recent years many have banded together to create uniform tax codes and a voluntary agreement to tax these companies, hoping to get around the constitutional issues. The bill, introduced by Massachusetts congressman William Delahunt, would let those states bound by the agreement tax remote companies.

At the hearing today, the bill got support from retailer J.C. Penny, which has to collect sales taxes on its Internet business because it also has bricks-and-mortar stores in many states. It wants to level the playing field to make it easier to compete with companies that are solely online. Opposing the bill, though, is the Direct Marketing Association, once known as the junk-mail lobby but which now represents catalog sales companies and electronic merchants. Not surprisingly, the DMA is opposed to the legislation, and DMA rep George Isaacson insisted that state legislators have vastly overestimated how much money they’re losing in sales tax revenue. He says the figure is more in the range of $145 million as opposed to the many billions claimed by the state legislators. Still, that’s a nice chunk of change that could put a few new teachers in the classroom without causing too much pain to the general public. No word yet on the bill’s prospects, but no doubt it will create a nice fundraising vehicle for legislators on both sides of the aisle.

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DEMOCRACY DOES NOT EXIST...

without free and fair elections, a vigorous free press, and engaged citizens to reclaim power from those who abuse it.

In this election year unlike any other—against a backdrop of a pandemic, an economic crisis, racial reckoning, and so much daily crazy—Mother Jones' journalism is driven by one simple question: Will America move closer to, or further from, justice and equity in the years to come?

If you're able to, please join us in this mission with a donation today. Our reporting right now is focused on voting rights and election security, corruption, disinformation, racial and gender equity, and the climate crisis. We can’t do it without the support of readers like you, and we need to give it everything we've got between now and November. Thank you.

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