Why Internet Sales Tax Won’t Work

The Wall Street Journal has an excellent article on the move by some states to tax internet sales.  Conclusion:  Taxing internet sales doesn’t work.  In fact, it drives business out of the state.

Governor Pat Quinn recently added to his reputation as America’s most taxing politician by signing a law applying the state’s 6.25% sales tax to Internet purchases made in Illinois. Within hours, Amazon, the online book and merchandise seller, announced it would discontinue using any of its 9,000 Illinois small business affiliates to avoid having to collect the tax. Congratulations, Governor.  Read More

I hope Alabama legislators are listening. While this article focuses on collecting sales tax from the seller, there is currently a proposal to collect internet sales tax from the consumer in the Alabama legislature.  Technically, consumers already have a duty to report internet buys and pay a “use” tax on those orders.  However, it is almost impossible to enforce.  Most people are unaware this duty even exists, much less follow through with the reporting.

Rep. Ison has introduced legislation that will require sellers to notify consumers of their duty to pay the use tax immediately after their purchase.  It will also require retailers to provide consumers with a summary of their purchases throughout the year and their tax obligations on such items.  The bill also amends the Alabama personal income tax form to allow for an easier reporting of the use tax.

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