Feinstein's Response (Internet Sales Tax)

Dear  Mr. Kelley :

Thank you for your expressing your opposition to collecting sales taxes on Internet purchases.  I appreciate hearing from you, and I welcome the opportunity to respond.

I am a cosponsor of the "Marketplace Fairness Act" (S. 743,) which was introduced by Senator Michael Enzi (R-WY) on February 14, 2013.  This bill would allow states to require sellers to remit sales taxes on internet purchases.  The legislation includes an exemption for online retailers with gross annual sales in the United States under $1,000,000.  The "Marketplace Fairness Act" is awaiting consideration by the Senate Finance Committee.

I understand you have concerns that this legislation would create a new tax on internet purchases.  To be clear, this is not the case.  Items purchased over the internet are subject to sales taxes in states that levy these taxes, including California.  Under current law, it is the responsibility of the buyer to report these purchases and pay the taxes.  This system puts brick and mortar businesses, which have to collect sales taxes at the point of sale, at a relative disadvantage in the pricing of their products. This bill would make it easier for states to collect the sales taxes they are already owed on internet purchases.  Ultimately, it would be up to states to decide whether to require the collection of these taxes.

Once again, thank you for writing.  If you have any further questions or comments, please do not hesitate to contact my Washington, D.C. office at (202) 224-3841. 

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     That Feinstein is a co-sponsor surprises me not.  Feinstein is a statist Democrat - she'd be in favour of anything that increases government power or government funding.  Anyhow.....






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Senator Feinstein -

     Thank you for making your position on this known (it came as no particular surprise to me,) but I note that you didn't seem to address any of the points I'd brought up in my letter.

     Meanwhile, allow me to address your points in kind, and perhaps add a couple of my own:

"I am a cosponsor of the "Marketplace Fairness Act" (S. 743 ), which was introduced by Senator Michael Enzi (R-WY) on February 14, 2013.  This bill would allow states to require sellers to remit sales taxes on internet purchases.  The legislation includes an exemption for online retailers with gross annual sales in the United States under $1,000,000.  The "Marketplace Fairness Act" is awaiting consideration by the Senate Finance Committee."

     How are we to expect collection and disbursement of all of these sales taxes to be handled?  Where these taxes are to have been collected, that fell to the purchaser (on his annual tax return.)

     However, you now want a broad assortment of RETAILERS to keep track of the various sales tax jurisdictions: their rates, their process, their contact information, &c &c.  Isn't this putting an unnecessary load on these businesses?  Are you expecting the states to simplify how they're going to get "their" money?  How much is that anticipated to cost - yet another cost that taxpayers are expected to bear...

     (Yes, I know the bill CURRENTLY stipulates a one million dollar gross sales/year threshhold - but how many of us REALLY think that it will stay up there?  How many of us think it will be eventually ALL RETAILERS?)

"I understand you have concerns that this legislation would create a new tax on internet purchases.  To be clear, this is not the case.  Items purchased over the internet are subject to sales taxes in states that levy these taxes, including California.  Under current law, it is the responsibility of the buyer to report these purchases and pay the taxes.  This system puts brick and mortar businesses, which have to collect sales taxes at the point of sale, at a relative disadvantage in the pricing of their products. This bill would make it easier for states to collect the sales taxes they are already owed on internet purchases.  Ultimately, it would be up to states to decide whether to require the collection of these taxes."

     I was not concerned about it as a "new tax" - naturally, if it had been the imposition of a "new tax," this bill would have had to have started on the House, not gone there after Senate approval (it's been 25 years since my last civics class, but I do recall that the Founders intended for the PEOPLE to be represented in taxation - not the States.  And, since the Senators were originally appointed by State legislatures, it was required that "finance" bills be introduced in the House.)

     However, while it won't impose a NEW tax, it will still impose a burden on the taxpaying citizen - and, looking at recent economic history, an increased effect tax rate is the LAST thin we need - we're trying to get into a recovery, and you can't do that if you keep having capital syphoned off without producing anything in return.

     But, I think you misunderstand where the "advantage" lies between walk-in retail and mail-order retail.  Walk-in retail requires more floor space to accommodate foot traffic, which calls for less efficient storage of wares, less ability to stock wares (without increasing floor space,) and is - by its nature - required to be situated in high-traffic (therefore high-rent) areas!

     Couple that with the fact that property "values" have been artificially inflated as a result of the recent "subprime lending crisis," which have dragged other prices along with them.  So, a walk-in retail store is stuck with a logistically (relatively) inefficient use of space & resources - which they have to pay more for.

     A mail-order business needs only to accommodate their own staff, is able to much more efficiently use their available floor space (and cubic volume!) is able to be situated wherever they please (as long as they have access to USPS/contract carrier shipping,) doesn't require the lighting of retail, has a lower burden for climate control - mail-order businesses have an advantage in logistics, more than anything else.  Their big expense is in shipping, but that can be balanced out through selection of location, efficient use of space & staff, reduced utilities, and the like.

     In short, mail-orders don't enjoy an advantage due to tax structure - it is entirely attributable to the business model!  And, it actually makes sense for much of our economy to shift to mail-order, it being more efficient than walk-in retail.  (This is not to say that walk-in stores will ever entirely go away, but it's probably going to primarily be things like foodstuffs, clothing, various parts, and entertainment venues.)

     And, if you're going to leave it up to the states to decide whether or not to collect (do you honestly think any of them are going to say No?) then why is a Federal law necessary?  Given that, I think it quite likely that there are other - far more important - matters to concern the Senate - recovery of the economy, increase in employment (tip: bring manufacturing jobs back!) correction of fuel prices (there's no reason for them to be as high as they are, not that I can see...) allowing the Postal People to operate under budget once again,) and other measures that will have a far more beneficial impact on the Federal AND local economy!

So, a brief analysis:

- Since the decision was, is, and apparently remains with the States, a Federal law is unnecessary,

- This law won't do anything to help the economy in terms of the Public at large - instead, it will cause somewhat more difficulty for citizens,

- It imposes an unnecessary, unproductive administrative burden on businesses (which will actually INCREASE base prices!)

- It has a theoretical "floor" for enforcement - but who is to say we don't get the rug yanked out from under us?

- It does nothing to address the intrinsic differences in business model between walk-in retail and mail-order retail (NOR SHOULD IT.  Businesses should be free to select under whichever model they choose to operate,)

- It does nothing to address inflation - either the inflation that's put businesses into the messes they're in, or the inflation that shall continue to come along,

- Nor does it address real estate or utility price increases - which will effect both businesses and residences.

One does not need a course in economics or government to figure out that this bill won't do anything useful to help businesses or people, it will merely add to the burdensome body of law to which we are already subject (If "Ignorance of the Law" is no excuse for breaking it, then the laws should be reduced in number until they become a body the average individual can keep up with - the fact that there are over twenty general specialisations of United States Law - a CREATED system - is indicative of an underlying problem, I think.

Jon D Kelley 

Proprietor and Chief Engineer
Kelley's Works in Progress
San Jose, CA

Internet Sales Tax measure:

This is expected to be vote on on Monday, 13MAY2013.  WRITE YOUR SENATORS NOW!

This measure's primary proponent is Senator Mark Enzi (R-WY,) so email him and email BOTH of your state senators!  This is likely to place an unnecessary burden on small businesses (now or in the future,) and is wrongheaded and foolish - especially with all of the economic troubles we're having right now...

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Senator Enzi;
      I would like to write you in protest of the Internet sales tax being discussed (and, hopefully, voted down.)
    I do not believe the consequences of such a bill are being fully considered, and it is being pushed through for the wrong reasons.  Allow me to elaborate:
    - If a state "depends" on revenue generated from sales tax (local or interstate sales,) then it should work to reassess its priorities.  Perhaps spending less money would be an answer?
    - Having to assess, collect, and remit sales taxes for all state imposes an unnecessary and burdensome task upon small businesses that conduct sales over the Internet.  This will also open up businesses to potential for being audited, penalized, and even potentially sued by any of the forty-odd states that collect sales taxes, rather than just the state in which they are present and the Federal government.
    - Having to send out separate remittances to a number of states every quarter similarly imposes a great (and unnecessary) adminstrative burden upon small businesses - a large corporation has the resources and manpower to handle this, but a "one-man band" business?  Not so much.
    - This bill is purported to help small business.  However, small businesses (like myself, for instance) are more likely to go out of business entirely, rather than deal with the headache that would be imposed by this measure.
    - The businesses that are complaining most about a "tax advantage" for Internet sales are most likely located in various microeconomies where local inflation has run rampant, and they therefore have a greater cost of doing business.  Assessing state sales taxes does nothing to address this problem - what is needed is economic recovery in various areas (urban California, New York City, and the like spring readiliy to mind,) because the base price will still be lower - and it's entirely possible that the cost of ordering online, including paying sales tax and shipping, will be rather less.
    - This can also open the travelling consumer up to "double taxation" - once the "use taxes" become mandated, what's to stop a state from assessing purchases made in corpus out-of-state with the state's own "use tax" above and beyond the sales tax already paid?  (Nota Bene: I believe this is what is happening with California's "sin tax" on tobacco - in all forms - but i have yet to verify this.  So, if I were to purchase a box of cigars while out-of-state, I am theoretically required to pay: state sales tax, state tobacco tax, and California's tobacco tax - and from all of these taxes, I get nothing in return.)
    While the measure - as currently proposed - seems to exempt small businesses - what's top stop it from being changed later, to apply to all Internet sales?  And, potentially, to all purchases made while a state resident is not physically present in the state?
    In addition, with all of the economic headache that America has right now, how can it be thought that increasing the tax bite on the consumer would be any help?
    Senator, I implore you to reject this measure out of hand, it does not serve the interests of the American people, and it is open to greater abuse in the future.  Moreover, I consider it wrong-headed and foolish, and is likely to serve as a sterling example of the Law of Unintended Consequences in the near future!

Thank you.

(signed) Jon D. Kelley

cc: Senator BOXER, Senator FEINSTEIN.

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Per usual, I will be sure to post any responses I get.