Internet Sales Tax Debate

As a consumer, I am inclined to hold the position of not wanting sales tax on online purchases. I buy products from Amazon because I think they are a good deal, though I'm not fond of the added shipping charges. When I buy an item from Amazon (I usually buy books online), I weigh the price of the item plus the shipping against the price with tax in a real store or online store such as Borders to decide where I should purchase the item.

However, from a government perspective, and the perspective I will support in this discussion, I believe every online company should charge a sales tax. At first I thought that filtering the sales tax to each of the states would be confusing and maybe even add an element of confusion to the easy task of transferring information online. I also thought that paying a tax based on the location of the store employees would be insanely complex too, especially in terms of stores that have bases in multiple places, possibly including foreign countries. However, our book for this class said that an online banking transaction costs $0.04 versus more than $1 for a transaction at a branch, which was greater than a 25x factor of improvement (page 11). Additionally, screening for potential credit card fraud is more complex than evaluating sales tax rules, according to the article "Internet Retailers Outgrow Their Sales Tax Exemption," published in 2009. In the early days when this issue was first debated in 1992, technology was not developed enough to even make it worth suggesting that huge online stores like Amazon should be including sales tax. Now that nearly 20 years have passed and technology has furthered itself so much, it really is time to bring up the discussion of online sales tax once more. Over the years, online stores that have physical locations, like Barnes and Noble, have been forced to add sales tax for online transactions. If some online businesses have to face this "disadvantage," then all online businesses should have to include the sales tax that you would find at any other bricks and mortar store in which you shopped. When Borders was in the process of finding out whether it needed to impose an online sales tax, it was said that the court rejected the argument that Borders and Borders Online were two separate companies, according to the article "Online Tax Debate Heats Up." That argument was because the courts had ruled that if an online store had a physical store, the online store must charge sales tax as well. However, most if not all online stores have some type of storage place or even home office or hub (even for the computer system it takes to run the site), so I think for the sake of fairness, that should count as a bricks and mortar store. The best way to solve this issue is to impose a sales tax for all online shopping, the same as you would in actual stores. It would be a change, and one we're not necessarily used to in online shopping, but after a certain amount of grumbling, everyone would accept it and move on. While a fixed rate / universal sales tax would be the quickest and easiest solution, there would be a humongous debate on what it should be because different states have different rates. Additionally, that would still put online stores like Amazon on a different playing field from online stores that already charge the sales tax because they have a physical location. I feel the best solution is developing and implementing software that could calculate the appropriate sales tax for online shopping over the next few years. While it would take longer to implement, it would be more fair in the long run, to consumers and to states (who are the ones who see this money and can hopefully use it instead of adding or raising other taxes to increase revenue).