No (Internet Sales) Taxation without Representation!

by | Jun 26, 2018

No (Internet Sales) Taxation without Representation!

by | Jun 26, 2018

Last week the United States Supreme Court, in the case of South Dakota v. Wayfair, ruled that the Constitution’s Commerce Clause allows state governments to force out-of-state businesses to collect state sales taxes. This decision overturns the court’s precedent that a state could require only businesses with a “physical presence” in the state to comply with state tax laws.
Unless Congress exercises its authority under the Commerce Clause to counter this decision with legislation, retailers will have to calculate sales taxes on every online purchase. An error in calculating sales taxes could cause a small retailer to undergo a costly and time-consuming audit, or even audits by multiple state governments. The compliance costs, along with the sales taxes themselves, will raise the cost of online commerce, burdening consumers and limiting the growth of internet business.
The burdens imposed on online commerce by the court’s decision will fall particularly hard on smaller internet retailers that rely on online sales to stay open. Stifling the growth of smaller and new internet retailers may be bad for consumers, but it serves the interest of large brick-and-mortar retailers, as well as large online retailers that already have to comply with state sales taxes because they have a physical presence in most states. These large businesses support giving states new taxing powers because they wish to use government power to make sure their smaller competitors stay small.
Allowing states to tax internet retailers with no physical presence in their states — and thus limited influence over state legislators — violates the principle of no taxation without representation. Tax- and power-hungry politicians will likely use this new power not just to increase taxes, but to impose other tax and regulatory burdens on out-of-state businesses. Having the power to tax and regulate employers and workers who cannot retaliate at the polls is a dream come true for many politicians. By making almost all online purchases subject to sales taxes, the decision will also reduce pressure on states to keep sales tax rates low.
The Constitution’s drafters intended the Commerce Clause to create free trade among the states, not to enable states to impose taxes and regulations on out-of-state businesses. The growth of online commerce does not change the Commerce Clause’s purpose.
Allowing state governments to force out-of-state retailers to comply with state tax laws harms small businesses, harms the growth of online commerce, and raises prices. It also benefits politicians seeking new tax revenue and helps large, politically-powerful corporations.
Congress must protect consumers, taxpayers, and small businesses by passing legislation limiting states’ ability to extend their taxing power across their borders. This would be a rare instance of Congress using its Commerce Clause powers for the intended purpose of promoting free trade among the states, not enabling the growth of government.
Reprinted from ronpaulinstitute.org.

Ron Paul

Ron Paul is a doctor, author, former member of Congress, Distinguished Counselor to the Mises Institute, and Chairman of the Ron Paul Institute for Peace and Prosperity.

View all posts

Our Books

Shop books published by the Libertarian Institute.

Podcasts

scotthortonshow logosq

coi banner sq2@0.5x

liberty weekly thumbnail

Don't Tread on Anyone Logo

313x0w (1)

313x0w (1)

313x0w (1)

Our Books

Recent Articles

Recent

TGIF: Hooked on the State

TGIF: Hooked on the State

Since the government partial shutdown began, we've been seeing panicked headlines about states being denied federal money for promised or already-started energy and infrastructure projects. Other sorts of subsidies are also in jeopardy. You'd think that not getting...

read more
Liberty: Natural, Practical, and Divine

Liberty: Natural, Practical, and Divine

What is the best ethical framework upon which to hang the case for liberty? The libertarian debate over this question has long been cast as a contest between natural rights and utilitarianism. Murray N. Rothbard championed the natural rights position, most thoroughly...

read more

Pin It on Pinterest

Share This