Taxation, Representation and the Web

Buying things over the Internet and not having to pay taxes has come to almost feel like a birthright. Except, of course, it’s not.

That was simply a combination of an anti-tax mood at a time when it seemed that credit card users would go on swiping their plastic forever. Now  wallets and purses have much shorter opening hours than a year ago.

States are hard hit by the falling economy since collections from sales and use taxes are plummeting. And even if California is in terrible shape, it has an income tax and you have to wonder how well states that do not have income taxes are going to weather the economic downturn.

With 300,000 unsold homes and a $2.4 billion shortfall, Florida is looking at raising its paltry 34-cent-a-pack cigarette tax to $1.34, an effort that news reports say has failed for several years. Without an income tax, Florida has subsisted on tourism, but it would seem logical that the House of Mickey is in for some tough times even if gasoline is dirt cheap right now. People losing their homes and jobs may not have visiting Pirates of the Caribbean at the top of their list.

People are supposed to voluntarily pay taxes on Internet purchases in Florida (and I presume in several states.) Right. That’s why it’s reported that buyers owe the Sunshine State about $2 billion.

It’s time Congress considers biting the Internet bullet. Not only does voluntary reporting not work, as more and more business move to the Web, states are going to lose the ability to tap into revenue. And as much as I don’t want to pay more taxes, I also don’t want to drive on bridges that collapse, have parks close or have schools that have no backup from a state’s ability to raise revenue.

Vendors who make sales and use tax software say that tax audits are going to mushroom as taxing authorities try to close loopholes and round up the tax dodgers.

There will be screams, of course. But as one vendor put it, 2009 will probably be the best chance for enacting Internet taxation we’ve seen. Unless someone can produce the revenue from somewhere else—the sin taxes are going to stop being productive if pushed high enough—it’s time to meet  the need.