Jacob Sullum

Still, that's 46 returns (45 states with sales taxes plus the District of Columbia), which have to be filed monthly or quarterly, and 46 potential audits every year, not to mention all the misunderstandings, disputes and hassles that fall short of an audit. You can start to see why the Supreme Court deemed collection of sales taxes from remote vendors an unconstitutional burden on interstate commerce.

But the Court also said Congress, under its power to regulate interstate commerce, could authorize such tax collection, which is what it is poised to do. Unfortunately, it has overlooked a simpler, fairer and smarter way of letting states get the revenue they crave.

In a 2011 paper published by the Mercatus Center at George Mason University, Veronique de Rugy and Adam Thierer recommended "an 'origin-based' sourcing rule for any states seeking to impose sales tax collection obligations on interstate vendors." Under that rule, which mirrors what happens when you buy something while visiting another state, each business collects sales tax on behalf of the state where it is based, no matter where the customer happens to be.

The beauty of this approach is that it treats all retailers equally, eliminates the daunting challenge of dealing with many different taxing authorities and respects state policy choices while encouraging tax competition between jurisdictions. Evidently the idea makes too much sense for Congress to consider.


Jacob Sullum

Jacob Sullum is a senior editor at Reason magazine and a contributing columnist on Townhall.com.
 
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