An Objection to the Notion of “Lost Revenue”

An endorsement of the “Amazon tax” by the left-wing Center on Budget and Policy Priorities has brought the topic back into the news, and while it’s predictable that such a group prioritizes expansion of revenue uber alles, it’s disappointing to see the same principle so thoroughly permeating our government:

[Rep. Steven] Costantino [D-Providence] has said that the law is intended to help level the playing field for local retailers who collect the tax and are at a competitive disadvantage with online retailers who do not.
Gary S. Sasse, director of the state Department of Revenue, said that how state sales tax applies to online purchases has “become an issue that all of the states need to face.”
It could be resolved by Congress, but “unfortunately, Congress has punted” on the issue, he said.
“Short of Congress exercising the necessary leadership on this issue, you’ll have states responding to this issue . . . [by passing] this type of legislation,” Sasse said in an interview at his office on Friday.

Frankly, I find the “competitive disadvantage” argument to be a ruse. Anecdotal evidence suggests that the lack of sales tax essentially adjusts for shipping costs in consumers’ minds or, in the event of free shipping, for the delayed gratification. Given their differing model, some online retailers do have lower prices for particular items, but those differences are independent of taxes and shipping.
The larger point is the distasteful practice of government’s chasing revenue wherever it may exist. A market has developed for untaxed online goods, and reformulating the law in order to siphon some money to state governments that have driven their polities into the ground becomes a matter of Congressional “leadership”?
Congress should leave the law as it is. If other states follow Rhode Island’s lead and attempt to tax all online sales based on the existence of affiliate programs (that offer fees for referrals and the like), I suspect online retailers will continue to end the programs, rather than give up their counterbalance to shipping costs. In the meantime, state-level officials should concentrate on proving their competence at doing something other than grabbing dollars from the private sector.

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Bill Felkner
12 years ago

Technically, online purchases already have sales tax (user tax) and you’re supposed to self-report and pay it when you file in April. But that rarely (never) happens.
The Amazon tax forces online merchants to become tax collectors. It this takes hold, anyone who sells online will be filling out tax reports for each state. So if you think the paperwork is onerous now, multiply it by 50 times.

joe bernstein
joe bernstein
12 years ago

It ONLY applies if the retailer has a branch or affiliate of some sort in this state.It MIGHT apply if they sell aunique product through selected dealers in RI.
Of course,I’m not an attorney and I may be completely wrong.

12 years ago

Ah, now that Rhode Island has settled that competitive issue, it’s on to the next. Let’s make sure that all online stores have an actual brick and mortar facility for that business. Oh, wait, though it may prove to ballance overhead for the businesses, it would not create any more revenue for the state, uh, Never Mind.

12 years ago

Amazon simply pulled all its affiliate agreements in RI and now NO revenue some into RI from those sales.
Other states looked at doing this but when Amazon threatened to pull its affiliates they backed down. Its just NY and RI doing this now as far as I know.
When NY loses their case in the Supreme Court RI’s law will be illegal also and the affiliates will return.

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