Internet Free-For-All Needs To End

It is possible Monday was the last Cyber Monday in New York state with no sales tax.

Good.

The U.S. Supreme Court refused to hear an appeal of New York’s taxes on websites like Amazon.com and Overstock.com. The companies were fighting a state law that forces them to pay sales tax just as any business located on Main Street, Jamestown, would have to do. The Internet retailers have generally not had to charge sales tax in states where they didn’t have a physical location, but New York and other states say companies have a physical presence when they use affiliates – people and other businesses who drive traffic to an online dealer.

Retailers plan to take their message to Congress to push for a law change that would make the law the same in every state. They are correct that the law should be the same in every state – but the law should require sales taxes be paid. The rules are different in every state, a bad situation for business and a confusing one for consumers.

Amazon supports the Marketplace Fairness Act, which passed the Senate in May. That law would require states to simplify their sales tax laws in exchange for being able to tax Internet sales from companies with more than $1 million in sales annually. The bill is now in the House, where there is no guarantee it will make it to a vote. A simpler solution would be to simply require online retailers to pay sales tax, period.

That is one option suggested in a report by the New York State Tax Reform and Fairness Commission, which states such digital taxation would generate about $35 million a year. The state Legislature should be emboldened by the Supreme Court’s decision and take the next step to tax Internet purchases if the federal government won’t.

Not only would the move add a revenue stream to state government, it would level the playing field between brick-and-mortar stores and their online counterparts. Handling sales taxes differently for online retailers and for physical stores is a bad idea. It hurts local businesses – which employ local residents – because they have to charge more for the same goods. It hurts local governments who have to look to raise property tax and other fees to make up for lost sales tax.

Too much about the Internet is a free-for-all. When it comes to commerce, the free-for-all needs to end.