Congress, which is trying to find money by looking under the sofa cushions, has resurrected a plan to require Internet shoppers to pay state and local sales taxes.
The bill, dubbed the Main Street Fairness Act, was explained thoroughly earlier this month by Walletpop Blogger Josh Smith. In short, the measure was introduced by Rep. Bill Delahunt, a Taxachusetts Democrat, who argues that it is unfair to local businesses that online businesses escape paying sales tax.
The history of the battle over taxes goes back to a court ruling in 1992 when the Supreme Court confirmed that it was indeed too onerous and costly for businesses to calculate state and local taxes because they vary so much from state to state.
For example, according to the Tax Foundation, Alaska, Delaware, Montana, New Hampshire and Oregon don't charge any taxes at all, but Alaska allows local municipalities to charge their own sales tax. Juneau, for instance, charges 5%.
And that's just the beginning of the potential complexity. The worst is probably the four cities in central Alabama -- Brookwood, Coaling, Coker and Vance -- that have a total sales tax of 11%. Someone who makes a purchase in any of these places pays 4% to the State of Alabama, 5% to Tuscaloosa County, and 2% to the city where they made the purchase.
Delahunt wants to encourage states to simplify collection through a "Streamlined Sales and Use Tax Agreement." Twenty-three states have actually already undertaken this project, but the rest of them are taking a wait-and-see attitude. That's probably a wise move -- this is an election year.
Don't we all love searching around on the Internet for the deal that lets us pay a low price and escape paying taxes, too? Are you going to vote for the Congressman who voted to eliminate that perk? I didn't think so. And more importantly, neither do the Congressmen who have to stand for election.
Investing Like Warren Buffett
Learn from one of the world's best investors.View Course »