26
Apr
08

The State Sales Tax Cartel.

Investor’s Business Daily correctly condemns New York state politicians for trying to tax economic activity in other states. Politicians in Albany and other state capitals fear that consumers can escape harsh sales taxes by going online to buy products, but the editorial explains that the correct response is not to create a privacy-emasculating scheme among states to track out-of-state purchases, but rather to reduce the burden of government:

Passed as part of this month’s New York state budget was Spitzer’s idea to make online businesses like Amazon.com, with no physical presence in the state, pay the state’s sales tax of at least 8%. New York is turning to this because of a severe budget crunch, and the state promises it will mean an extra $50 million this year and $75 million next year. There’s only one problem: the practice is unconstitutional. The Supreme Court has ruled repeatedly that both the Commerce Clause and the Due Process Clause require that a seller has a physical presence within the state for it to have the right to levy sales taxes. …if New York gets away with taxing non-New York businesses you can be sure other states will follow its lead. …For eight years, 44 states have taken part in the “Streamlined Sales Tax Project,” an attempt to find a way to tax online commerce. New York’s move gives it the lead in those efforts. But doing so goes a long way toward ripping up the Constitution’s Commerce Clause, which declares that “Congress shall have power . . . To regulate commerce . . . among the several states.” …In the age of the Internet, trying to make out-of-state companies pay in-state sales taxes is an unconstitutional outrage; it would mean government monitoring computer use right out of George Orwell’s “1984.” Instead of mugging non-New Yorkers with illegal taxation, the Empire State should consider something Democratic and Republican politicians alike think of as out of the question – cutting spending.

Read the whole thing.

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