The online tax grab

  • 20 August 2019
  • NormanL

Back in 2018, the Sipreme Court allowed states to move ahead with their long-stymied plans to tax online sales. Local tax collectors argued it wasn't about the money, but fairness. But it was always about the money -- millions of dollars of revenue states and local governmets craved but, until the Supreme Court's Wayfair decision, were unable to get. Now the taxmen are coming in droves, hitting small businesses, and individuals, the hardest. As the Wall Street Journal wrote:

...the Kansas Department of Revenue will now require all out-of-state retailers to collect sales tax no matter how much business they do in the state. This includes college students selling used textbooks on eBay and retirees hawking a few hand-made greeting cards on Etsy .

Democratic Gov. Laura Kelly earlier this year vetoed an internet sales tax with a small-business exception that the GOP-controlled Legislature had included in a broader tax reform. The state agency then imposed the internet sales tax by fiat while claiming it lacked legal authority to exempt out-of-state small businesses, which are now hostages in a partisan brawl.

And states are getting even more creative on what they tax:

Other revenue-grubbing states like Connecticut and Rhode Island have interpreted Wayfair as a license to tax digital services. Connecticut expects to raise $30 million this year by taxing digital downloads and subscriptions. Big tech companies can handle compliance headaches, but startups trying to compete have a harder time.

Rhode Island also promised to reduce its sales tax rate if the Court let states tax remote retailers. Democrats instead pocketed the change to backfill the state budget, which is also what Ms. Kelly plans to do in Kansas. As mom-and-pop businesses attempt to calculate their tax bills in the coming months, expect the state revenue grabs to proliferate.

It was always -- always -- about the money. The question is how long before this grab for online cash drives small online retailers out of business.