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Campaign Questions: In 2012,Texas was second in the country in uncollected internet taxes. The comptroller’s office eventually reached a settlement...

In 2012, Texas was second in the country in uncollected internet taxes. The comptroller’s office eventually reached a settlement with Amazon.com, which began collecting sales taxes in the state, but other e-retailers without a physical presence here still are not. What can or should the comptroller do to address this issue?

As Texas Comptroller I would immediately order Amazon to stop collecting sales tax for the residents of the State of Texas, and apologize profusely for the confusion and misunderstanding.

Let me explain why an Internet sales tax is such an incomprehensibly bad idea. If the economy is to get stronger, charging consumers more when they're already struggling to afford goods and services is not a wise move. Even brick and mortars won't win. Here's why.

This is not a time to add a 6% to almost 9% price increase to the purchasing of goods. A tremendous number of people buy online, and by increasing their costs across the board, tax revenue won't go up nearly as much as sales will go down. Here's how the economists look at it: Sales tax revenue is just one component of the overall economy; everything is interconnected. If sales tax income goes up, but overall tax income goes down because (a) people are spending less, (b) companies go out of business, (c) fewer companies start up, and (d) people lose their jobs, the net tax income will actually be less.

And that's just what will happen if we get an Internet sales tax. It will result in further damaging our economy while also causing the loss of jobs while also causing the state to collect less revenue, not more. It's not just that consumers will buy less online if their purchases are taxed. It's that operating an online store that deals with sales tax accounting is a very non-trivial task.

There are 50 states, almost all of which have individual sales tax rates. Worse, there are hundreds (possibly thousands) of local tax rates across the country. For an online retailer to sell in an America with an Internet tax rate, sales taxes will suddenly have to be collected for all of these jurisdictions.

Even that's not so bad. Good shopping cart software can track rates based on ZIP code.

Where it gets bad is reporting. Filing sales tax reports for hundreds or thousands of jurisdictions, each with their own different forms and filing rules, can become incomprehensibly complex. Small online retailers won't be able to keep up. Of course, the large online retailers, like Amazon, will have the IT resources to build out tax management into their systems. As a result, Amazon will get stronger at the expense of small online retailers.
Now, here's the biggest irony: Who are the small online retailers? In many cases, they're stores that have also set up shop on the Internet. They showcase their inventory, not only in their brick and mortar storefront, but in their online store as well. With complex, convoluted Internet-based sales tax in place, these local brick and mortars will have to close their online stores and concentrate only on local sales.

Amazon will once again be strengthened at the expense of local brick and mortars.

 


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