NCPA - National Center for Policy Analysis


December 27, 2007

Just in time for the holidays, Congress is reviving a plan to increase tax collections on Internet consumers, says the Wall Street Journal.


  • Right now, online stores that don't have a building in a consumer's state don't have to collect state and local taxes on your purchases.
  • That's because of a 1992 Supreme Court decision that ruled forcing such obligations on companies with no physical presence in a state could cripple interstate commerce.

But a new bill by Rep. William Delahunt (D., Mass.) would give greater powers to America's tax collectors.  Under the bill:

  • All but the tiniest businesses would be mandated to calculate, collect and remit taxes to every locality where he has a customer in every one of America's 7,500 taxing jurisdictions.
  • Each merchant would also have to submit to audits from governments coast to coast.
  • Further, anticipating growth in government and complexity, the plan limits the tax collectors to two rates per zip code.
  • Multiply that by America's 43,000 zip codes and small merchants could potentially have to keep track of 86,000 different tax rates, depending on what they sell and to whom.

Believe it or not, it gets worse, says the journal. The board of state and local tax collectors that administers the "streamlined" plan recently amended the agreement.  Now the plan would allow some states to choose whether to tax online purchases at the seller's address or the buyer's, depending on whether they're in the same state.  The end result will be different tax rates for in-state and out-of-state vendors -- a clear Constitutional violation.

Source: Editorial, "Taxing E-Shoppers," Wall Street Journal, December 26, 2007.

For text:


Browse more articles on Tax and Spending Issues