By a vote of 70 to 24, the U.S. Senate passed on Monday the so-called "Marketplace Fairness Act" (S. 273), which is designed to reverse the United States Supreme Court decision in Quill Corp. v. North Dakota, 504 U.S. 298 (1992), so that states can now impose a new sales tax collection duty on large retailers that sell more than $1 million per year online whether they have a store in the state or not. As I previously wrote on IR on April 23, this foolish bill will likely not work and will be easy to evade due to the fact that customers may still shop on overseas sites that as yet have no obligation to collect the sales tax of any state in the USA. It is easy to see why greedy state governments want the bill.
The states are in a panic fantasy that they will collect new sales tax revenue that they mistakenly think they are now missing and they already have a deal with very large online retailers in place. But it is not so easy to understand the murky motives of large retailers who are competing with themselves due to both brick and mortar stores and online sales of the same products by the same retailers. Part of the answer is that by repealing the Supreme Court decision of 1992 that was aimed at the mail order catalog industry, the idea of online geographic-based sales tax will get a very large nose under the tent to set a precedent for even broader online taxation in the future. And what will state and local governments give to taxpayers or vendors in return for the tax? Not police or fire protection or utilities. The parties to the sale will get absolutely nothing from any level of government. The law will also establish the precendent that states can tax any sale just because they want to whether or not they provide any service at all to the seller or the buyer. It will enable states to track a large number of your personal online purchases, keep track of your credit card information and your location a all times no matter where your portable laptop or I-phone PDA may be or whether or not you are in Illinois or not as long as your credit card has an Illinois mailing address. Please click here to read again my April 23 IR article if you want more information on this incredibly stupid bill. Watch for large brick and mortar retailers to join forces with greedy states to accuse Amazon, Ebay, or eveen smaller online retailers of an "unfair" advantage over "Main Street" and giant malls. The advantage of online retailers is a fair one not because some of their sales are not now not subject to online sales tax ( some sales are subject to sales tax already), but because they offer better selection at better prices with better service and delivery and that is the real threat the giant brick and mortar stores are afraid of.