Friday, Dec. 3 —
A couple of weeks ago, in a short piece looking at the continuing debate over Internet sales taxes, I beat up on Americans for Tax Reform for a press release I believed was incredibly misleading. Here’s the original piece:
Here’s a response from Ron Nehring from Americans for Tax Reform:
Dan:
I need to take issue with your column.
I did not claim that a $750 TV “bought online” would go up to $812 under the NGA plan.
I specifically said that a $750 TV bought on 800.com would go up to $812, because 800.com is located in Oregon, which has no sales tax, and the company has no nexus in any other state. As a result 800.com collects no sales taxes for any of its sales. I did not say, nor imply, that no sales taxes are collected anywhere “online.” As you already know, and we have repeatedly stated, e-commerce vendors collect sales taxes in states where they have a nexus. This is a critical distinction which you glossed over in order to paint Americans for Tax Reform as “twisting the truth beyond recognition.”
Under the NGA plan, every consumer would ultimately pay sales taxes at the time of the sale for every tangible good sold. That means that the price paid at the time of purchase for the TV in question WOULD go from $750 to $812 (for a New Yorker, as I am, paying 8 1/2% sales tax). What I stated in our news release was accurate, and relevant. I suggest you visit 800.com and note that the company prominently states on its website that its sales are free of sales tax collection.
Finally, despite the fact that the information in the release was accurate, you rely on something that you claim is “implied” in order to justify your conclusion that it “twist[ed] the truth beyond recognition.” That is just a non sequitir. It might be justified if I claimed that any good bought online today is free of sales tax, but I did not say that at all. Go back and read the release. It is you who has twisted the truth, not us.
If you don’t agree with what we’re fighting for, that’s fine. And if you want to use your column as a sounding board for the politicians at the NGA, that’s fine too. But on a complicated issue like e-commerce taxation, it is just plain wrong for you to gloss over critical differences in order to paint someone as dishonest.
And here’s my response:
Your headline on the release makes no distinctions about Oregon or anywhere else, for one thing. It shouts: “Plan makes a $749 TV cost $812…” — and if that’s not designed to make a reader worry about his next TV costing more, wherever he buys it, then I’m George W. Bush.
Your example, using 800.com, makes no mention of where the store is located, or that it’s one of the few states that doesn’t charge a sales tax. You only told me that when I took issue with the implication of this.
It doesn’t change the fundamental point, however: We are encouraging people to shop from merchants that do not apply sales taxes, even if they’re in states (which is most of them) that rely on such taxes. Andit’s going to undermine the tax base. I realize you want that to happen. I don’t mind if we do away with sales taxes but I would like us to think about the implications before we do it this way.
To which he replied:
As you know, headlines, or grabbers, are always intended to get the reader to read the rest of the document. The claim made in the headline is justified in the press release itself. It did not “twist the truth beyondrecognition,” as you claimed.
Further, 800.com is a commonly used example when discussing the sales tax issue. In fact, the Wall Street Journal mentioned the company for illustrative purposes in an editorial several months ago, and the company president continues to make the rounds on talk radio discussing his site and the implications of a sales tax collection system.
The fact that 800.com is located in Oregon, or in any state without a sales tax, is only slightly relevant. Any company with nexus in only one state can be compelled to collect sales tax in a maximum of that one state under current law. Hence, if 800.com were located in Washington State and only had nexus in that state, purchasers located in 49 other states would not be compelled to pay sales tax at the time of the purchase. Under the NGA plan, purchasers in 44 states would ultimately be required to pay sales tax on purchasers in 44 states would ultimately be required to pay sales tax on their online purchases. This would increase the cost to consumers by between 3% and 11%, PLUS the fees paid to the Trusted Third Parties, and the incentives used to induce companies to join the new system. People are annoyed enough already by ATM fees. How do you think they will respond to a per-transaction fee of $1 or $2 on their purchases, in addition to sales taxes? Perhaps a San Francisco-style initiative to ban such schemes?
Further, if you plan to objectively report on this issue, I suggest you scrutinize the NGA’s claims that a tax-free Internet will result in “FEWER TEACHERS, AND LESS LAW ENFORCEMENT IN OUR COMMUNITIES,” as one NGA release claimed. What a ridiculous example of alarmist rhetoric. State and local governments are struggling with huge surpluses, not deficits caused by the vaunted “hollowing out” of sales tax revenue. Of course, your column failed to mention that either.
My response:
We’ll have to disagree on whether the headline is justified by the press release. I think it’s grossly misleading.
800.com may be a “commonly used example,” but it was a new one to me — and I’ve followed this issue closely. A Wall Street Journal editorial page plus some talk-radio shows aren’t exactly the stuff of a cause celebre.
I don’t dispute that the current law allows retailers to not charge sales taxes in other states unless they have a business “nexus” in those states. Nor do I dispute that the NGA plan raises huge questions — and I would not support it as currently structured. But that doesn’t make the issue irrelevant.
Is the NGA claim alarmist? You bet. Is the potential problem small? No. Favoring online businesses at the expense of Main Street businesses is a recipe for undermining Main Streets. It won’t happen immediately, or completely, but a bias in the tax code does make a difference. And ultimately it will erode revenues in a noticeable way. An economic boom masks all kinds of structural shifts. But when the business cycle turns down, as it always does at some point, these issues will no longer be abstract to states and communities that depend on sales tax revenues.
States that charge sales taxes typically have “use taxes” — in the same amount as their state sales taxes — that consumers are supposed to pay on goods they order from out-of-state. The enforcement of use taxes is at best limited, largely, I’m sure, because doing so is incredibly intrusive. But if Mr. Nehring and his ideological partners get their way, the the states will not sit still — and I hate to imagine the result.
The bottom line remains the same: Should we use the tax code to favor one kind of retailer at the expense of other kinds of retailers? I say no.