The Internet is probably the greatest boon to individual liberty and entrepreneurship since Ford started churning out affordable cars. It allows people to decide where and with whom they will shop. But as a recent headline in USA Today reads, "States hope to begin taxing online sales." The newspaper continues, "the group [of 18 states] hopes to convince retailers but does not force them? to begin collecting taxes and turning it over to state governments." Merry Christmas, shoppers.
According to the National Conference of State Legislatures (NCSL), states lose $8.9 billion a year from uncollected sales taxes on electronic transactions.
But you can only "lose" something if it belongs to you. The Supreme Court ruled twice, in 1967 and again in 1992, that states can only collect taxes from companies located in their territory otherwise, what would stop them from taxing anyone, anywhere.
Let's rephrase the NCSL's claim, then: taxpayers save $8.9 billion, which they now can spend and invest.
Slapping a tax on Internet sales would hurt the many entrepreneurs who make a living on e-commerce. For example, 724,000 Americans use eBay as a main or supplementary source of income, making the online auction site one of the nation's leading job producers.
The Internet has cut costs for commerce. States should learn some lessons, including finding ways to cut, not raise, taxes.