But if Enzi's bill becomes law, fairness goes up in smoke. Online merchants would become revenue collectors for every sales-tax jurisdiction in America – an estimated 9,600 of them, each with its quirks and quiddities. No longer would Internet retailers based in Massachusetts be liable only for sales taxes owed to Massachusetts. They would have to calculate and remit taxes owed to Tennessee and California and Wyoming and New Jersey, charging different levies for different customers, and somehow keeping up with the ever-shifting kaleidoscope of sales-tax rates, definitions, exemptions, and deadlines.
Yet the owner of the brick-and-mortar shop around the corner would go on as before, charging only a single tax rate and remitting taxes to only a single state.
Supporters of the legislation promise that this will all be less onerous than it sounds. The bill includes simplification mandates such as free tax software, and it encourages multistate cooperation in streamlining tax rates and centralizing revenue collection. MarketplaceFairness.org, a website created to promote the Enzi plan, offers the assurance that with modern technology, Internet retailers have nothing to fear. "Keeping track of a few thousand local tax rates," it says soothingly, "is no longer an insurmountable technical, administrative, or financial burden."
For mammoth retailers like Amazon or Wal-Mart, the prospect of juggling "a few thousand local tax rates" may not be an intolerable burden. For countless smaller online businesses, however, it could be the kiss of death. And what happens when the technology turns out not to be quite as cheap and easy as advertised? Writing in the Wall Street Journal last summer, Overstock.com's chairman/CEO, Patrick Byrne, and president, Jonathan Johnson, warned against complacency:
"It took our team of 20-30 experienced IT professionals 9,412 hours over five months to install, test and integrate the software that let us properly calculate use tax in one additional state. The annual software license fees for the first year, the internal and external development and installation costs, and the cost of collateral hardware and software came to $1.3 million. And that's just for one state."
Whatever inequities exist in the current system, the proposed legislation would be much worse. There's a crucial reason why merchants can only be required to collect taxes for states in which they are physically present: Anything else would be taxation without representation. States must not be allowed to reach beyond their borders, imposing tax obligations on retailers who had no vote or voice in creating those obligations, no political recourse, and no opportunity to be heard. Against such unfairness, Americans once fought a revolution. A craving for revenue is no reason to forget that.
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