On the homepage of his US Senate website, Illinois Democrat Dick Durbin invites visitors to learn about his record of "Looking Out For Consumers" by protecting them "from excessive fees and predatory practices." Alas, the senator's concern for the welfare of consumers goes only so far. Indeed, he is poised to introduce legislation that would subject millions of American consumers to "excessive fees" they have long been sheltered from: sales taxes on their online purchases.
The tech website CNET reported last week that Durbin, the Senate's assistant majority leader, will offer a bill after the Easter recess that would allow states to force any Internet vendor to collect sales taxes for them -- not just when the vendor has set up shop within their borders, but even when its facilities are located elsewhere. If it passes, Durbin's bill will undo the longstanding rule that merchants only have to collect sales tax for states with which they have a "substantial nexus." That phrase comes from the Supreme Court, which has confirmed the no-nexus-no-tax rule in a line of cases stretching back more than 40 years.
While the court's decisions originally dealt with mail-order catalogs, the logic is just as pertinent to sellers doing business over the Internet. If a company has no shops, offices, or employees within a state, there is no reason it should be obliged to charge sales tax when it happens to sell something to a resident of that state. That is why most Americans pay no sales tax when they buy a product from Amazon, which has an actual physical presence in only a handful of states, while those who make a purchase from Barnes and Noble or Walmart -- companies with outlets nationwide in addition to their online sites -- typically will be charged their state's sales tax.
To hear Durbin tell it, there is something unjust about sparing Internet retailers the burden of calculating and collecting taxes for states they don't operate in. "Why should out-of-state companies that sell their products online have an unfair advantage over Main Street bricks-and-mortar businesses here in Metro East?" he said in February during a meeting with Illinois business owners.
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