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Posted: October 10, 2010 12:30 a.m.

Taxing online enterprises makes sense

Congress is in recess for the November election. They left D.C. without acting on any tax issues. Fear of the electorate kept them from voting to increase or decrease taxes on different income-level groups, as well as taxes on industries that move their operations out of the U.S. Any mention of tax increases can be toxic, but I'll put on the gas mask and bring up increasing tax revenue.

As the "season for spending" (Christmas, Hanukah, Kwanza) approaches, economists and, more importantly, stockbrokers will be watching the sales figures to determine whether the buying public is in a mood to spend. Seasonal retail store sales in 2009 were about $440 billion, up 2.3 percent from the previous year. According to ComScore, online retail sales, or ecommerce, for the spending season in 2009 were up 5 percent over 2008, more than twice the increase in retail store sales. Total online purchases increased $15 billion.

Internet sales hit $156 billion for the year in 2009, up nearly 17 percent...and we know what a lousy year 2009 was for the economy. Why not tax Internet sales? According to Federal tax laws, only those states in which a company has an office/branch/facility can tax online for those companies' goods sold via the Internet.

The law says you, as an Internet customer, are required to pay sales tax to Georgia for all your Internet purchases each year. Did you include that in your tax filing this year? Did you even know that was required?

My answer is "no" and "no," and I'm willing to bet you answered the same way. From the eCommerce blog, "...most Internet companies don't have to collect out-of-state sales tax. However, consumers, businesses and any end -users still must pay a "Use Tax" on non-taxed purchases that they make through mail-order or online."

So, there are billions of potential tax dollars for both the Feds and the states that are never paid or collected. Now for those of you whose hair on the back of your neck is now standing straight up, angry that we would be unfairly taxing folks who can't afford the added expense, relax for a moment. How do you buy on the Internet? Rarely can you buy C.O.D. (cash-on-delivery for you younger folks who are unfamiliar with this term), cash is not an option, and checks don't work here. Payment takes two forms...credit card or direct withdrawal from your checking account (PayPal).

Who can afford to buy in this manner? For the most part, the same people who can afford to buy at the retail store. So there is no difference in the ability of buyers to buy online as opposed to in-store. The advantage to buying online...no taxes paid online balanced by the shipping charge.

What if the Feds put a half-percent sales tax on all Internet sales? It would have brought in $7.8 billion last year. That would cover our financial aid to Afghanistan and Egypt. Or launch an alternative energy initiative. Or repair bridges, sewer systems and water pipes, gas pipelines that are rotting and in near collapse.

And why not create a means to collect and distribute to the states the taxes that should be paid, the expense being born by companies that do business on the Internet? That would give the states millions of dollars to re-hire teachers.
Bottom line: If a consumer was at a retail store, he or she would be paying state taxes on sales and paying a salary to a local employee who pays tax on his/her income. It is fair for the state to collect taxes on Internet sales and fair to the consumer as well. Lots better than either cutting back on essential services or increasing income taxes.

Bob Furnad is a Covington resident and former president of CNN Headline News.


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