Dan Cook: State tax hampers Internet business
CHARLESTON, W.Va. -- Call me the village skeptic but, as to West Virginia sales tax revenue claimed to be "lost" due to the interstate-commerce clause of the U.S. Constitution, I raise both eyebrows skyward. That provision prohibits laying of taxes or duties on goods crossing state lines.
The Supreme Court has rightly ruled several times that businesses in one state making only "mail-order" (and more recently, Internet) sales to people in other states do not have to collect sales tax unless the businesses have venue (physical presence) in the buyers' states. Proposals so far from those who wish to bypass this ruling are ill informed and worse advised.
A recent Gazette editorial cited a University of Tennessee study that said West Virginia "loses" $50 million a year because Internet sellers don't collect and pay over sales taxes to the state. Another claims a $100 million "loss." Is it $50 million or $100 million? Or neither?
Doing simple math, $50 million divided by 1.8 million West Virginians is $27.77 per capita, be they day-old infants, the incarcerated, virtual illiterates or comatose seniors. Presuming all of them have Internet access, computer skills and a credit card or PayPal account, each would have had to buy $462.83 (X 6% $27.77 sales tax) worth of fully taxable goods through cyberspace.
In my computer-literate family, we purchase about $1,100 worth of prescription medication annually over the Internet. No tax on drugs there or in West Virginia. I buy about $200 worth of specialty meats and cheeses (not sold here) per year so I "save" $2 in sales taxes but pay about $20 "shipping and handing." (Where's the "saving by tax-dodging?" Duhh.)
I pay sales tax on supplies and tools I order for my office from Staples, Sears, Best Buy and the like because they have stores in West Virginia.
Even West Virginia customers rarely visit my printing business in Hurricane. They order from all over the state by phone and email. Collecting sales tax has become a real pain, burdening us sellers with keeping track and sorting it out.
We recently received a $1,400 sign order by phone from a customer with a Huntington address. If I'm audited by state tax people, there will be questions about why I didn't collect $14 for Huntington, which has a 1 percent sales tax. My answer: "Because the buyer is not inside the city limits." What a pain, having to keep track of 300 venues and determine and report if customers are in or out of which county or town. There are people who get their mail here in Hurricane, Putnam County, but live in adjoining Culloden, Cabell County, and vice versa. Imagine what an impossibility tax collection would be when multiplied by the 46 states that have a sales tax and all their subdivisions!
What if my tiny Internet mail-order business, offering a total of five items, has to file state, county and city sales tax forms to all of them monthly, even if zero sales? West Virginia penalizes merchants $50 for not filling out and mailing in forms, even if there were no sales during that period. I'm sure others do the same. What a mess! It would put me out of business.
What sane person would want to start a small mail-order enterprise (that might eventually become a chain of stores) when faced with those unreasonable burdens and stumbling blocks? I'll bet Messrs. Spiegel, Marcus, Sears and Ward would have dropped their plans in discouragement.
The simple and intelligent constitutional alternative is one equalized, universal federal sales tax with a portion dedicated to deficit reduction and the rest distributed among the states, who would pay shares to their counties and cities. Duhh.
Cook is an author, artist and inventor in Hurricane.