Online sales tax coming to your inbox

Argus Leader discusses the online sales tax with CEI's Jessica Melugin. 

In a letter to Congress in 2013, groups such as Americans for Tax Reform, Campaign for Liberty, Americans for Prosperity, Center for Freedom and Prosperity, and the Competitive Enterprise Institute balked at the notion of the physical presence standard as a “tax loophole.”

The issue of multiple tax jurisdictions, tax holidays and ever-shifting rules at the city, state and county level across the country can be a real burden for online businesses, particularly midsize retailers, said Jessica Melugin of the Competitive Enterprise Institute.

“In some states, the granola bar is food, and it’s taxed. In other markets, it’s a snack, and it’s not taxed,” Melugin said.

“If you’re someone on Etsy selling socks out of your garage, managing all this is a bit of a feat,” Melugin said.

The cost of compliance could be enough to put smaller retailers out of business, and Melugin doubts that states would see huge increases in tax collections by forcing compliance. She points to an Internet trade group-sponsored 2010 study from George Mason University and Brookings Institute scholars that suggested sales taxes would account for "less than three-tenths of 1 percent of state and local tax collections."

“I think the states are kind of in for a rude awakening,” she said. “It’s going to be a big mess and a big court fight.”

Read the full article at Argus Leader.