Internet Sales Tax / by kevin murray

Nobody really enjoys paying taxes and it isn't too surprising that when it comes to paying sales tax on goods purchased that there is plenty of controversy because most states having a sales tax in which the state, the city, and the country get their portion of the taxes paid.  When it comes to the interstate commerce and the sales tax there is a misimpression that this hasn't been adjudicated previously at the highest court level, but it has.   In the National Bellas Hess, Inc. v. Department of Revenue of Illinois, case of 1967, the Supreme Court determined that National Bellasshould not collect sales tax from Illinois residents and stated:  ” "The Commerce Clause prohibits a State from imposing the duty of use tax collection and payment upon a seller whose only connection with customers in the State is by common carrier or by mail."  In 1992, the Supreme Court made essentially the same decision in Quill Corp. v. North Dakota.  On December 2, 2013, the Supreme Court refused to rule on or review the New York state law mandating the collection of sales tax for online purchases from residents of New York.  This non-ruling by the Supreme Court neither sets a precedent nor overturns previous relevant interstate sales tax decisions.


The general rule for sales tax collection is that if the seller has no physical presence within the state in which the product is being sold, and further to the point has no sales agent within that state, and that the only connection between the seller and the buyer is by common carrier or mail, that a sales tax should not be imposed, as it would be in violation of the 14th Amendment, in particular the due process clause.  Additionally, the Supreme Court pointed out that the: "simple but controlling question is whether the state has given anything for which it can ask return."


Fast forward to 2013 and with the massive amount of transactions performed via the internet, the sales tax authorities of most states are salivating to get their hands on this money, as according to States lose: "an estimated $23 billion a year in uncollected sales taxes from web retailers."  What hasn't changed though is that the transactions that are conducted through the internet are essentially the same sales process of buying from a mail order house of yesteryear, but updated and refined to take advantage of today's technology...  Also, while critics complain about the advantages of out-of-state retailers versus in-state retailers, one must also keep in mind that the products being ordered must travel from one state to another, that freight, postage, and packaging does cost money to the out-of-state retailer, and that those that are out-of-state are competing against the proximity, convenience, personal touch, and nearness of brick and mortar retailers. 


The fact of the matter is if sales taxes themselves were not so high and so prevalent, that there would hardly be the argument that we have today.  State and local governments are aware of this fact, that is why it is quite common for states in conjunction with local tax jurisdictions to have periodic "tax holidays" from time-to-time. 


A sales tax should be equally applied within a state, subject to local jurisdictions, and the consumer should not be penalized for shopping outside of his state.  Consumers vote with their dollars again and again and again.  The taxing authorities just hate losing that money and rather than looking at their taxing policies internally, they want to take more from a consumer who is savvy enough to make himself a better deal online or wherever.