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Rundles wrap up: Following the (online) money

It was only a matter of time until the government got around to forcing Internet merchants to collect and distribute sales tax to states and smaller jurisdictions for online purchases – and even if the Tea Partiers in the U.S. House won’t go along with what the Senate did last month with the Marketplace Fairness Act of 2013, it is, once again, only a matter of time.

Too much money is at stake – some say as much as $23 billion per year and rising – and Republican and Democratic governors alike (not to mention mayors, county commissioners, transit authorities, etc.) generally drop political expediency when there is so much free money so tantalizingly close at hand.  They don’t even have to go to the voters! Duh. No brainer.

Technically speaking, we Coloradans who buy stuff online from out-of-state vendors (or, as they say, vendors with no “nexus”) and don’t pay the state sales tax of 2.9 percent (called a “use tax” in our state if reported later than the actual transaction), are scofflaws. It’s a big, big club. Huge. I buy stuff online and skip the tax reporting, but I don’t go to the Internet to save on sales tax. I go there because I can find stuff I can’t find around here.

I do, however, believe that imposing the burden of collecting sales tax on Internet merchants is the fair way to go, but I object to the proposed new law exempting online merchants who do less than $1 million in annual sales from the requirement.

I mean, c’mon. The idea behind the less-than-$1 million exemption – and some, like eBay, believe it should be  less than $10 million – is that it will be a too-expensive burden on small business to discover all the necessary tax reporting and remittance information required to comply with the law. I don’t buy that argument. Heck, if my telephone’s GPS can direct me to Bob’s House of Pies in Joplin, Mo., through a detour set up last week by the local road department, then digitizing the nation’s patchwork quilt of sales tax jurisdictions would be a piece of cake. As the saying goes, there’s an app for that. Or soon will be. I’m pretty sure that once Congress got serious about mandating sales tax collections and payment for Internet merchants that a kid at Google, over lunch, wrote the program for the app and it will be available on iTunes for $5.99 within seconds of passage.

The problem, of course, will be the various governmental entities setting up a workable system of collecting and distributing the tax payments so that Internet retailers can make a payment to a common pool and not have to hire someone to go through each and every patch of the quilt. “Workable” and government don’t often go hand in hand, so my suggestion is that for a small fee, a slight percentage of the transaction, that the governments hire that kid at Google to figure it out. For the kind of money we’re talking about –
1 percent, say, of $23 billion is $23 million, for instance – the solution will be ready next Tuesday. If the government runs it, it won’t be ready for years and will never really work.

Internet merchandizing has been booming for years, up 16 percent or so annually years on end compared to single-digit growth for retail as a whole, and there’s no reason to believe this pace will slow even when (not if) its sales tax-free status goes away. And make no mistake: Republicans and Democrats at every level possible will get their hands on the money.

The real challenge won’t be governments collecting the tax. It will be them spending it wisely. I wish there was an app for that.

Oops! In my column last month, “Ethical Dunces,” about the growing instances of school administrators cheating on standardized testing scores, I inadvertently included Denver’s Hallett Fundamental Academy among the cheaters. That school and its administrators were ultimately cleared of any wrongdoing. I offer my sincerest apology for the error.   

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Jeff Rundles

Jeff Rundles is a former editor of ColoradoBiz and a regular columnist. Email him at jrundles@cobizmag.com.

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