We're Web Merchants, Not Tax Collectors
It will be a disaster for small businesses if Congress asks us to collect sales taxes for out-of-state Internet sales.
As business owners, we often traveled to toy soldier shows in different states. When we made a sale, we were required to collect sales tax for that state. Each state required an "out of state" permit for shows within their jurisdiction.
Then came the hard part. First, we had to determine whether we should file monthly, quarterly, semiannually, or annually, depending on the timing of the shows, their frequency, and what was allowed in each state. We had to set up automatic payment reminders so that we wouldn't incur late payment penalties. We could accrue additional penalties, from $25 to $50 plus interest, if we miscalculated the sales tax. Miscalculations were easy to do, because the sales tax often varied by region within the state. After spending 30 to 60 minutes for each sales tax return, we had to file unique state applications by mail. Some states such as New Jersey and Pennsylvania have recently complicated the process by requiring their sales tax to be paid by electronic fund transfers. In compensation for our efforts, we would get a credit of less than 3% of the sales tax due. Often this did not even cover the cost of postage.
Let's hope Congress thinks carefully before extending this system to the Internet.