Another view: Congress should follow Vermont's lead
Vermont is known for being one of the more progressive states in the union, and often has no qualms about passing laws at the state level that the federal government should be dealing with, but is too hamstrung by lobbyists to take action.
The downside is that being a trail-blazer on certain issues makes Vermont a target. A case in point is legislation passed in 2011 that would apply sales tax laws to companies such as Amazon.com that solicit business through customer-referral agreements with Vermont residents. In other words, any Internet click-through sales would be taxed. Even though the law doesn't kick in until one-third of states with sales tax have adopted similar laws, Amazon wasted no time in its reaction. The company has barred Vermont residents and companies from earning money by referring customers to its website, the Burlington Free Press reports.
Cairn Cross, a Vermont venture capitalist, predicts that other big players such as Google will follow Amazon's lead and discontinue online advertising programs in Vermont.
"There are a lot of micro and small businesses that are making some sort of their income off these types of programs," he said.
State Tax Commissioner Mary Peterson says the "click through advertising" law was intended to increase pressure for a federal law so that Internet retailers and brick-and-mortar stores are all operating on a level playing field.
In its email to Vermont participants, Amazon itself indicated a preference for broad solutions to sales tax issues, rather than state laws.
"Amazon strongly supports federal legislation creating a simplified framework to uniformly resolve interstate sales tax issues," the email stated. "We are working with states, retailers, and bipartisan supporters in Congress to get legislation passed that would allow us to reopen our Associates program in Vermont."
That makes perfect sense. It would be much easier and less confusing for online retailers to deal with one federal law rather than a patchwork of 50 separate state laws. Unfortunately, that doesn't seem likely to happen any time soon.
A bipartisan group of House lawmakers are reviving legislation that would permanently extend a ban on taxing Internet access, signaling that efforts to pass a separate bill to widen online sales taxes may continue to face resistance in the lower chamber, according to NextGov.com.
A ban on taxing Internet access has been on the books since 1998, enacted in part to protect the growth of the then-nascent technology. It has been renewed four times since then.
The House wants to make the ban permanent. House Judiciary Committee Chairman Bob Goodlatte, R-Va., on Friday reintroduced the Permanent Internet Tax Freedom Act, which would enact a permanent ban on federal, state, and local taxes on Internet access.
The effort is widely supported by Internet freedom and antitax coalitions, NextGov.com reports.
The Center on Budget and Policy Priorities, however, has called the legislation "harmful" and estimated that the ban costs states up to $7 billion annually in potential revenue.
If Congress were to enact a federal law for online sales tax, that could translate into another $23 billion in new annual revenue. Estimates from the National Conference of State Legislatures show Vermont would stand to collect an extra $44 million a year from an Internet sales tax.
Imagine how many of our state's budgetary problems could be solved with this money. More importantly, an Internet sales tax would help protect Main Street businesses from the unfair advantage that online retailers enjoy.
Vermont has the right idea. It's time for the federal government to catch up.
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