| What's New | Publications | Commentary | In the News | Press Releases |
 |
 |
If you need a reason to be thankful this holiday season, how about this? If you go online to order a $25 book you can save $1.50, courtesy of President Bush and the US Congress. Buy $100 worth of CDs and you'll save six bucks.
The money you save is what you would have paid in sales tax, had you purchased the book or CDs at your local mall instead. Part of the reason why you don't pay in cyberspace is that President Bush recently signed a two-year extension of a ban on Internet-related taxes.
Internet providers don't have to charge you sales tax and, in most cases, neither do online merchants. But what saves us a few pennies adds up to a big loss for New Jersey and other states because, overall, states get nearly half of their revenue from sales tax receipts. And before you make that gesture of pretending to play a violin in mock sympathy, consider how states use that sales tax money. They pay for law enforcement, for teachers, for roads, stuff like that.
It is estimated that the inability to collect sales tax on electronic commerce cost states about $26 billion last year. One study says New Jersey might be missing out on more than $150 million a year. Another says that in 2011 it could lose a whopping $1.4 billion because of expanded use of the Internet.
That's one problem. Another is that the ban isn't fair. Why should your friendly, neighborhood merchant be the bad guy because he or she can't offer you the same deal as Uncle Sam? And there's this too: who shops online and who doesn't? It doesn't take a genius to figure out that people who can't afford to own a PC and pay for an Internet provider are the ones who miss out on the sales-tax holiday. Washington is serving up a tax break for the wealthiest people in the land. Sound familiar?
One more thing, the ban is highly hypocritical. Isn't Washington where they say the federal government should do less and states should have more authority? You say you want a devolution (apologies to the Beatles) and then you tell states they can't raise money they need to do the jobs that are being shifted to them.
The way the states see it, they're not asking to impose a tax. They just want to be able to collect taxes that already are on the books. You see, every state's sales tax is really a sales and use tax. That means if you buy something out of state to take back home and use, you are supposed to pay tax to your home state. But here's the catch. A 1992 US Supreme Court ruling said states can require you to pay use tax (if they find you) but they can't require a business to collect it unless said business also has a store, factory or whatever in your state. That's why you see things on Internet and catalogue order forms like "New Jersey residents add 6 percent tax."
This is not a partisan issue. The Republican Governor of Michigan, John Engler, said it well: "What the Internet should not be is a way for buyers and sellers of goods and services to avoid their obligation to pay sales and use taxes."
President Bush said he signed the moratorium extension to "ensure that the growth of the Internet is not slowed by additional taxation."
Yeah, like anything is going to slow the growth of the Internet.
Just as many other people are, I'm doing most of my shopping online this year, and here's why:
- No crowds to fight through in the stores.
- No traffic to get stuck in.
- No fear of terrorists.
- I can shop any time of day or night.
- I can do it in my pajamas.
Those are such powerful reasons to shop online, that I and a whole lot of other people would keep shopping online even if we had to add six percent to the cost of what we buy. And if we're willing to pay $20 a month to get online an extra $1.20 in sales tax won't make us pull the plug.
So this bit about slowing the growth of the Internet just doesn't fly. If Congress and the President really want Internet growth to be unfettered by cost constraints maybe they should get the companies that hook us up to stop charging the 20 bucks. Where is Washington on that one?
Jon Shure is President of New Jersey Policy Perspective, a Trenton-based nonprofit, nonpartisan organization that conducts research on state issues.
| © 2008 New Jersey Policy Perspective |  |