Americans have resisted sales tax reform for the Internet era, because they simply didn’t want to pay more taxes. These days, it’s hard to argue against that, even though most of the taxes we pay go to DC, but the sales tax situation is harming the state budgets.

I wonder if this debate will change as people have to pay tax on Amazon anyway, thanks to Amazon’s constant growth.


Photo by Kārlis Dambrāns on Flickr

Photo by Kārlis Dambrāns on Flickr

Amazon keeps opening more and more distribution centers, seeing up the ability to get next-day and same-day service to more and more Americans, particularly those with Amazon Prime and Pantry accounts. However the more states Amazon sets up shop in, the more states that are able, under the Constitution, to demand the collection of sales taxes.

That’s how there are now more states that Amazon collects sales tax for, than not. South Carolina is now the 27th state Amazon collects tax for, covering not just the majority of states, but a majority of Americans, too.

So now that most Americans are paying sales tax anyway, and Amazon continues to kick the tails of ‘main street’ retailers despite that, I hope that discussions of sales tax in the Internet era can go better. Sales taxes are better than income taxes. They make everyone pay their share, including illegal aliens! If we can find a way to make sure the states continue to get necessary revenue for basic state and local government functions, then we can avoid more states having to impose new taxes to make up for it.

Some states are even set to cut income taxes, in the event that a deal is done in DC, to ease the collection of sales taxes from residents, by retailers across state lines. There are ways we can do this that are simple, fair, and not a ridiculous burden on retailers.

My favored approach would be an interstate compact, where states can opt-in to having taxes collected for them, and to have businesses in state collect taxes for other states. In exchange, those states must then simplify their sales taxes from the ridiculous messes we see in some states today, into a narrow framework defined by the compact. The Streamlined Sales Tax is a possible way forward, one adopted mostly by GOP-leaning states. Apparently the Democrat states dislike having limits placed on their sales taxes, and instead just want to go with unconstitutional demands that the tax be paid anyway.

We can support federalism, the Constitution, and the growth of the Internet. And Amazon, through its gradual need to collect taxes anyway, may end up letting this happen.