Taxing the internet: a good idea?

The internet has been a tax-free zone since 1992. In those days it was just too hard for out-of-state retailers to figure out how to collect taxes and send them to all 50 states. The ruling actually applied more to catalog merchants (remember them?) than web sites, since in effect there were no web sites. Still, the largely tax-free status of web-only sales has helped propel internet sales to the point where they threaten “regular” sales.

Some states, like California, require that all internet sales to its citizens include sales tax. Most states don’t. The US Government is trying to make it easier for states to collect sales taxes and their latest measure has already passed the Senate. It’s unlikely to pass the House as easily.

We tend stay away from the thorny politics of sales taxes but since The Solid Signal Blog is a part of the same business group that includes… it should be pretty clear where we stand. We want a fair playing field for all internet retailers and we want to be able to offer you the best quality and value without being strangled by 50 different sets of rules. Simple as that.

It’s just as interesting to talk about the way this story has progressed. Back in the 1990s, purely catalog merchants weren’t really a big part of the economy. Sure you had your Sears, JC Penney and Montgomery Wards that did business through catalogs, but they had stores too. For 20 years the rule was, if you did brick-and-mortar business in the state you had to collect sales tax on catalogs too, just to be fair.

Then the internet happened. BOOM. There was online commerce before 2000 but not a whole lot of it… it was around Y2K that people started buying things online all over the place. The rules seemed to work just as written; the lack of sales tax helped internet businesses prosper and helped level the playing field. Local stores had sales tax, but online stores had shipping costs. It all seemed fair.

Unfortunately there’s no getting around the fact that in the last few years of the 2000s everyone took a financial hit. States looked to get back revenue lost to property taxes and that’s why this is happening now. Despite a hard-fought battle, California changed its laws so that ALL transactions must be taxed. Now other states are looking to get on the bandwagon.

Where do you stand on this issue? Now’s the time to step up and be heard!

About the Author

Stuart Sweet
Stuart Sweet is the editor-in-chief of The Solid Signal Blog and a "master plumber" at Signal Group, LLC. He is the author of over 8,000 articles and longform tutorials including many posted here. Reach him by clicking on "Contact the Editor" at the bottom of this page.