The nation’s brick-and-mortar retailers are promoting the Marketplace Fairness Act, which would force Internet retailers to collect sales taxes based on where the product was being shipped. It passed the Senate last week, but may have more trouble in the House.

FLOYD NORRIS

Notions on high and low finance.

It seems odd that states without sales taxes are opposed to the law. This would, if anything, encourage people to move to those states. Yet, as The Washington Post notes, seven of the 10 senators from the five states without sales taxes — Alaska, Delaware, Montana, Oregon and New Hampshire — opposed it.

That is odd because residents of those states who have products shipped to them will still be exempt from sales taxes on what they buy.

Retailers based in those states would have to collect sales taxes on products they shipped to states with sales taxes — subject to an exemption for small retailers that ship less than $1 million a year in products. So the retailers will suffer costs, although they do not seem likely to be very large. And retailers with physical presence in more than one state already must collect taxes for shipments to all of those states, something they evidently have figured out how to do.

As it is, you or I can avoid sales taxes on purchases we make by phone or over the Internet, so long as the retailer has no presence in our state. If we buy everything that way, we can get away with paying no sales taxes. If this bill became law, I, as a New York resident, would have to pay the New York tax if I had the goods shipped to me in New York. If I cared so much about ducking such taxes, I would have to move to New Hampshire or one of those other states. On the margin, that would make living in New Hampshire more attractive.

It is nothing short of amazing to me that this proposal is controversial. It already is the law that I am supposed to tally up what I buy from other states without paying sales taxes, and then send in a check to New York for the taxes I would have paid had I bought them here. Few people do so. What this would do is make tax compliance easier and provide badly needed revenue — from their own citizens — for struggling states and cities. It would also mean that local merchants — the ones who pay property taxes — would find it a little easier to be competitive with Internet merchants.

Article source: http://economix.blogs.nytimes.com/2013/05/13/sales-tax-rhetoric-and-reality/?partner=rss&emc=rss