May 9, 2013, 7:32 p.m. ET
*The Marketplace Fairness Act unfairly burdens online retailers. The burden
should be on state governments.*
By RAYMOND L. DEVER
The Marketplace Fairness Act—which would force online retailers to collect
and remit state sales taxes on purchases—passed the Senate this week, but
it faces an uncertain fate in the House. The bill’s proponents want to
level the competitive playing field for local retailers. Opponents argue
that it’s unfair and maybe impossible to burden Internet retailers with the
job of complying with the rules of thousands of state, county and local tax
I’ll leave it to others to debate the merits of taxing Internet sales. But
I do have a suggestion that could lift a lot of the burden from the
shoulders of online retailers.
My suggestion: Have each state designate one agency to receive a
once-a-year online submission from each Internet retailer that lists the
name and address of every person who made a purchase in that state, the
item purchased, and the amount of the purchase. After that submission, the
Internet retailer is done.
Internet retailers might also include a statement to consumers in the
online confirmation of each purchase to the effect that “This purchase will
be reported to your state of residence. It is your obligation to determine
whether this purchase is subject to your state’s sales tax, and if so to
report it.” What I have in mind is similar to the annual submission of W-2
or 1099 forms by employers, banks, brokers and others to the IRS.
Right now, local retailers have it relatively easy. True, they are they are
unpaid tax collectors—but only for one or a few jurisdictions. Internet
retailers, however, would be faced with collecting taxes from buyers
nationwide, determining which jurisdiction(s) each buyer lives in and
remitting the tax to the proper jurisdiction(s). Given the thousands of
jurisdictions, this would be a large burden on all Internet retailers and
may cripple many smaller ones.
Instead, my suggestion would make it the responsibility of a state agency
to ensure that these taxes are reported and remitted by their residents,
perhaps on residents’ income-tax returns (for those states that have an
income tax). States do not now enforce the collection of taxes owed to them
by residents on out-of-state purchases, possibly because they do not have
the necessary information to do so. Now they will.
The burden would be where it should be—not on Internet vendors who must
serve as unpaid tax collectors charged with determining compliance with the
rules of thousands of tax jurisdictions, none of whom provide any public
services to these vendors.
If a state decides that the cost of enforcing the tax is too burdensome,
well, that is their choice.
Mr. Dever is a retired accountant in Tucson, Ariz. A version of this
article appeared May 9, 2013, on page A15 in the U.S. edition of The Wall
Street Journal, with the headline: A Simpler Internet Sales Tax.