Brick-and-mortar stores are complaining that online stores not having to charge sales taxes is unfair; they’re right, what an occasion to end sales taxes!

Though it’s a state government leading the charge, the good justification for changing the law isn’t the one in the state’s interest. I see two complaints here:

  1. The state government wants more revenue. Online sales generally lower the amount of in-state sales, so the sales tax revenue is reduced.
  2. Physical retailers have to charge more than online retailers because of the sales tax boosting their effective prices. This gives buyers an extra incentive to buy online.

Complaint 2 is pretty reasonable. Unless we’re looking to give online sellers an edge for the sake of stomping out physical sellers, then the current situation is needlessly unfair. But there’s two ways to make it more fair. One is to add sales taxes to online purchases. The other is to destroy sales taxes entirely. Given sales taxes are a regressive, anti-demand tax, that second option is a lot nicer.

This second, better option would aggravate complaint 1 even further, but unlike sellers who only acquire revenue via selling things, state governments have other, better options. They can tax for land use. They can have progressive income or wealth taxes.

One comment in the linked WSJ article made a decent point against 1, as well: sellers without a physical location in the state are consuming less of the state resources. They aren’t taking up space, polluting the air and water, creating garbage, and otherwise creating various negative externalities for the state.

(Of course, the current court case can, officially, only be decided by what the current legal documents say rather than what they should say, and some analysis of the constitution suggests the status quo will be upheld. Though even the linked analysis then suggests that actual legislative changes should be made. The interstate commerce stuff is somewhat interesting, but a bigger hammer seems more appropriate here.)

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