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Is it fair to tax on the Internet?
May 6th, 2013
01:22 PM ET

Is it fair to tax on the Internet?

By Lisa Desjardins, CNN

Follow on Twitter: @LisaDCNN

Editor's Note: Listen to the full story in our player above, and join the conversation in our comments section below.

Washington (CNN) – Late this afternoon, the U.S. Senate is voting on and will likely pass what would be the largest expansion of taxes on the Internet.

The plan is called the Marketplace Fairness Act, a bill that gives States the power to insist that online company charge sales tax. (In return for that power, the Senate would require that states simplify their tax codes.)

That title, “Marketplace Fairness Act” points to the political problem here. This is a tax bill in a time when taxes are political outcasts. Why is the Senate poised to pass it now?

[2:45] "Because government is actually desperate for revenue, they’re looking at absolutely every corner they can hit," says Christopher Morris, chairman of the philosophy department at University of Maryland

State governments need money. However, the votes probably would not be forthcoming if the bill were called “The Increase Taxes On The Internet Act."

Instead, the Senate is pushing the fairness issue, implying it’s not fair that states are losing sales tax money due to untaxed Internet sales.

[3:32] Luke Johnson, philosophy Ph. D. candidate at the University of Georgia says "Everyone walks around talking about justice and philosophy as if they know what they are… that does seem to be at work in the Marketplace Fairness Act."

However, opponents point out that sales tax in physical stores theoretically supports the road and infrastructure that allow the store to exist. So then, why would the Internet need sales tax?, they ask.

 To hear an answer to that question, listen to our story about when and which taxes are fair. It may get you thinking. Subscribe to this podcast on iTunes or Stitcher. And listen to CNN Soundwaves on our SoundCloud page.

soundoff (52 Responses)
  1. DJ Reality

    Here comes another tax burden on the American people. This will be a burden on internet retailers as well. All the states with sales taxes and the counties that have high sales taxes than the states. This is to much and can shut down businesses and kill jobs. Besides the money we spend has already been taxed once before when we made it. We are getting taxed twice on our incomes and that is wrong.

    May 7, 2013 at 11:54 am | Report abuse |
  2. dee ophat

    Another tax burden on the American public. With millions of people unemployed, creating more taxes on the majority of the middle class that buys merchandise thru the internet, is not just wrong, it is criminal. What will all these taxes collected be used for? I guess President Karzai in Afghanistan needs us to pay him more American money. So called democracy at work. The rich Senators probably have never bought any items over the internet. Again, graft, greed, and corruption win out over free enterprise and the American way.

    May 7, 2013 at 9:31 am | Report abuse |
    • ACommonMiddleClassAmerican

      I'm a democrat, but I agree with you. I'm 100% against this Fairness Act b.s. What us middle class people need to do is push back. )(In reality, this won't happen.) -> Just stop buying over the internet. Force these online businesses to push back. If we stop buying, they'll lose money. Online businesses losing money would definitely put pressure on them and the Senate for approving this so called Fairness Act. NO NEW REVENUE!!! CUT GOVENRMENT SPENDING!!!! CUT WAR SPENDING!!!! BRING OUR TROOPS HOME!!!! STOP GIVING OTHER COUNTRIES FINANCIAL ASSISTANCE!!!!!

      May 7, 2013 at 10:16 am | Report abuse |
  3. PDXSerric

    I don't mind paying taxes as long as the taxes are balanced and fair and apply to everyone earning more than below the minimum threshold for poverty. However, an internet tax... who receives the tax? The state/country that the sale was made or the state/country where the product is being sold from? i.e. if I live in Washington and buy an item online from Florida, who receives the tax? How is that tax apportioned to the state in question? If I purchase an item online from Japan, the UK or what have you, who gets the tax then? And what about virtual items as opposed to physical items?

    It seems that there are going to be a LOT of questions revolving around this for some time to come.

    May 7, 2013 at 2:20 am | Report abuse |
  4. michelle

    Hopefully, every voter in 2016, when they vote, will remember the Demonrats for who they really are
    *the party for homosexuals, lesbians, & illegals
    *the party for higher taxes
    *the party to take away guns
    *the party to take away the freedoms of Americans
    *the party to make ILLEGALS legal
    *the party to do away with the Constitution
    *the party to do away with Christianity

    REMEMBER come 2016, WHO the true deceivers are

    May 6, 2013 at 11:06 pm | Report abuse |
    • PDXSerric

      Who the deceivers are? You, from the looks if it...

      May 7, 2013 at 2:16 am | Report abuse |
    • sdsd

      II will take your bait. Here is the equally stupid flip-side of the same coin of your post.

      Hopefully, every voter in 2016, when they vote, will remember the Republicans for who they really are
      *the party for homophobia, msygonists, & Nativists
      *the party for the 1 %
      *the party of the NRA
      *the party for the police state
      *the party to do away with all Civil Rights
      *the party for The Evangelical Theoracary

      May 16, 2013 at 11:35 am | Report abuse |
  5. Asher Newman

    Of course this is fair. People have to pay sales tax when they buy something at a store, so it is ridiculous to say they shouldn't have to when it is bought over the internet. Some say this will hurt the industry because of shipping, but the shipping cost could be subtracted from the sales tax for items over $75, and items under it will have to pay a smaller sales tax.

    May 6, 2013 at 9:55 pm | Report abuse |
  6. blern

    So, a small online retailer in Illinois who makes $1 million a year in interstate sales will need to pay sales tax for their customers in New York.

    What's the problem with this? Well, the business in Illinois is able to vote the politicians in Illinois out of office if they are unhappy with the way the state is handling taxes or what have you.

    However, the politicians in New York have absolutely no accountability for the business in Illinois. And the business has no recourse against said politicians.

    So...isn't this taxation without representation?

    May 6, 2013 at 7:48 pm | Report abuse |
    • Keith

      The way it would work if this bill became law is that the online seller would be responsible for COLLECTING state sales tax from the consumer, then remitting it to the state in which that consumer resides and purchased the goods. The burden of sales tax will be solely placed on the consumer, based on the state in which that consumer lives. For example, if you live in Arkansas, and you purchase something from Amazon, Amazon must charge you for Arkansas sales tax, and then remit that sales tax back to Arkansas Department of Revenue either on a monthly, quarterly, or annual basis. If you do not like the Arkansas sales tax, you can, as a citizen of the state, get in touch with your state representatives, petition your state government for a change in state tax policy, vote accordingly, etc.; therefore, the issue of "taxation without representation" is not presented by this proposed legislation. The burden on the online businesses will be an administrative one, though there are provisions in the bill which address this, requiring that states who wish to take advantage of this opportunity (states will be able to decide on their own to require online businesses to collect and remit tax for purchases which occur within their respective states; they do not need to require this) simplify their tax codes and implement a computerized reporting system (presumably online capability) with which online sellers who earn over $1M annually will be able to, with some ease, determine at the end of a reporting period how much was collected from buyers of that state and how much is due to be remitted back to the state. Although I do see the trouble that states, 20% of whose revenue comes from state sales taxes, have encountered in light of increasingly prevalent online shopping trends, and subsequent reductions in volume of in-store purchases, I am not suggesting whether or not I agree with this, as I have not yet decided how I feel about it either. Rather, I have looked at the bill a bit and just thought I would try and help to provide a little perspective as to how it is intended to work.

      May 7, 2013 at 1:24 pm | Report abuse |
  7. Joe C

    "However, opponents point out that sales tax in physical stores theoretically supports the road and infrastructure that allow the store to exist. So then, why would the Internet need sales tax?, they ask."

    To support the road and infrastructure that allow the store to deliver your goods to you.

    May 6, 2013 at 5:03 pm | Report abuse |
  8. willhaas

    Such a tax is a violation of our President's promise to not raise taxes in any way on 98% of Americans. Of course the ACA already violates that promise.

    May 6, 2013 at 4:49 pm | Report abuse |
    • jboh

      Get a clue. This is not a federal tax, it's a state tax. The POTUS has no control over state taxes. If you have a gripe, take it up w/your state. You Obama haters really should seek a mental health pro.

      May 6, 2013 at 7:31 pm | Report abuse |
  9. sammy750

    Next tax will be the air we breath. Republicans keep saying they hate taxes, no more taxes, but guess what. They pass big tax bills in Republican controlled states all the time. Republicans are the Robin hood stealing from the poor and giving to the rich.

    May 6, 2013 at 4:47 pm | Report abuse |
  10. S. Bonner

    Anyone who makes the argument that internet purchases should pay taxes meant to support the roads and local infrastructure that would support traditional brick-and-mortars forgets that all internet purchases (except digital downloads) are still shipped on those roads and infrastructure.

    Digital download taxes could, though, go towards paying for better information instructure in towns and rural areas which can then be 'rented' to providers to provide people with higher quality services and re-introduce the idea of competition between local providers.

    May 6, 2013 at 3:35 pm | Report abuse |
  11. ddavid1

    This bill will hurt the rural population the most. Shipping & Handling often cost more than the product itself. Which is also taxable in many states, so now those people are supposed to pay an added expense. Many will just drive into the cities, which adds to waste of gasoline, driving up its cost and environmental costs. This is a no win situation. And what keeps you from comparing internet prices ? If a product is under a $100 it will be cheaper buying it from the source, even as far as Hon Kong. Maybe overseas stores will benefit if a consumer is smart & shrewd enough.

    May 6, 2013 at 3:21 pm | Report abuse |
  12. Dan5404

    Of course it's fair. It puts local businesses on an even playing field and affords states much needed extra revenue. It'll cost all of us more who order bargains online, but those online businesses should not have an advantage over local businesses.

    May 6, 2013 at 3:16 pm | Report abuse |
  13. LA

    I'm not sure how they come up with the figures but I received a thing in the mail this year about stuff I ordered from Amazon and 70 dollars in taxes that I didn't have to put on my income tax unless I wanted to. I didn't, of course. Not sure how they based it....I only bought a few movies. Anyway....if this law passes.....I will curb my spending online as I'm sure many others will as well.

    May 6, 2013 at 2:48 pm | Report abuse |
    • briandavidleeg

      Your comment is why I am surprised Amazon supported this tax. My buying habits have already changed; the only reason I bought from Amazon, typically, is because of having saved money. With Amazon charging tax, where is the incentive of buying online?

      May 6, 2013 at 3:10 pm | Report abuse |
      • xxslr18xx

        Larger selection, no need to leave your house and waste fuel driving to multiple stores. Don't forget Amazon is usually cheaper base prices, so you would be paying less for the product and less sales tax in the end. You still win shopping online.

        May 6, 2013 at 4:31 pm | Report abuse |
  14. boomer in Mo

    Steve, unless you are doing at least $1 million in sales, you are exempt.

    May 6, 2013 at 2:46 pm | Report abuse |
    • Steven

      If you look at online retail net margins.... 1 million in sales is tiny... A handful of employees at best could be supported by a business that size.

      May 6, 2013 at 8:12 pm | Report abuse |
  15. boomer in Mo

    Since I both buy and sell on the internet, and DO REPORT my purchases on my state income tax form like Missouri law requires, I'd prefer it is collected at the time of sale. There will be software to make the tax reports on for sellers, probably provided free. I already have free MO software for my in state sales. This is not rocket science.

    May 6, 2013 at 2:46 pm | Report abuse |
  16. Jim

    To be fair, if a brick and mortar business offers the same products as an online company, then they should start their own online site and sell in 49 other States and around the world to level the playing field. Broaden their marketplace have more business instead of stifling other business with needless paperwork. The States are desperate for more money, and they can just vote and make your money theirs.

    May 6, 2013 at 2:31 pm | Report abuse |
    • xxslr18xx

      Why don't we pass a bill saying any item purchased online is not allowed to be shipped via public roads paid for with sales tax dollars?

      The people against this bill believe the brick and mortar stores should have to pay sales tax because people use roads to get to their stores. Internet stores should not because people do not use to shop. That makes no sense. Everything I have purchased online, except a digital download, has been shipped on a road paid for using taxes. The increase in internet sales has resulted in an increase in freight traffic on said roads. This increase in freight traffic along with a decrease in sales tax revenues has left this countries infrastructure in shambles...

      May 6, 2013 at 4:29 pm | Report abuse |
  17. Steven Hong

    I'm a small business owner who will be negatively impacted by this bill. It will be a significant amount of wasted effort to comply with the sales tax in hundreds of different tax jurisdictions. The states are supposed to provide "free software" to allow us to submit sales tax to them. However that will be a nightmare in and of itself. Think about your income tax forms... guess what, they are free too... just think about how easy it would be to fill out maybe 4 dozen of those income tax forms every month.

    May 6, 2013 at 1:55 pm | Report abuse |
    • xxslr18xx

      Steve, Just as you view this as unfair, so does the family that owns the small corner shop. They have to pay sales tax. They already do everything you complain about having to do. How is this unfair to you, when you already hold an advantage over another business?

      May 6, 2013 at 4:25 pm | Report abuse |
      • Steven Hong

        This is not a bill to support the local corner shop however it's proponents might be trying to sell it. This supports Walmart, Best Buy, and Amazon (who is putting a physical presence in every state) and that is why they are strongly backing the bill and paying for the lobbyists. Large corporations can easily comply with the paperwork burden, small businesses cannot. The fairness of an online tax is subject to debate. However the compliance nightmare is not debatable. It will hurt small business. Make compliance easier – then we can talk about what is or isn't fair.

        May 6, 2013 at 7:57 pm | Report abuse |
      • freddie commenter

        but the brick and mortars do not pay it for all states .... so now instead of fair it would swing he other way , a small internet business would have the onus of collecting and reporting for every single state ( yeah I know free software and forms )

        May 6, 2013 at 8:38 pm | Report abuse |
  18. Theresa

    Let's find out just how all Republicans in the House feel about the Middle Class after all. Will they fight tooth and nail for tax breaks for everyone, or just the wealthy? We shall see........

    May 6, 2013 at 1:49 pm | Report abuse |
    • stingisthetruth

      Uh, honey, it is the dems pushing for this sales tax, not the repubs. So you can thank your democrat senators for trying to screw you out of 8% more of your hard earned money. And what a brilliant thing to do... pile MORE taxes on an already fragile economy... because you know, hiking prices 8% won't have ANY effect on people's spending...

      May 6, 2013 at 5:00 pm | Report abuse |
  19. xxslr18xx

    Its not just the middle class... its everyone. Its being billed as fairness to get people in the middle. This year, it is estimated approximately $25b will be lost to online sales. That number increases every year. That is $25b extra the Fed government has to pay for infrastructure.

    May 6, 2013 at 4:22 pm | Report abuse |
  20. xxslr18xx

    read a book.... educate yourself.... turn off Fox News.

    May 6, 2013 at 4:23 pm | Report abuse |
  21. jboh

    Get a clue. This is a state tax. The federal gov will get none of the revenue. Know what you're talking about before you make yourself look foolish.

    May 6, 2013 at 7:35 pm | Report abuse |
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