Internet Tax Debate Should Focus on Consumption, Not Sales, AEI Fellow Says

Lawmakers should rethink their approach to addressing internet taxes to focus on “the consumption of goods and services by taxpayer-consumers” rather than continue the controversial debate over internet sales taxes, said Bronwyn Howell, visiting fellow at the American Enterprise Institute's Center for Internet, Communications and Technology Policy, in a Monday blog post. The debate over internet sales tax bills like the Remote Transactions Parity Act and the Marketplace Fairness Act has become a stalemate in recent Congresses. House Judiciary Committee Chairman Bob Goodlatte, R-Va., was seen as attempting to bridge that gap last year when he released a draft of his long-awaited Online Sales Tax Simplification Act (see 1608250062). The existing tax collection process “leads, in the case of sales and consumption taxes in particular, to the perception that these taxes are a liability on producers and not consumers,” Howell said. “At best, it appears that taxes collected in this manner will be little more than ‘voluntary donations’ by complying firms.” The “focus on supplying firms as the entity of interest, and not the act of consumption, means a small number of high volume/value firms such as Amazon and Netflix become targets for enforcement, but a large number of firms each making only a small number of sales fall under the radar,” Howell said. “Turning vendor firms into tax agents for a large and likely increasing number of governments, all with potentially different tax rates and collection rules, imposes a significant transaction cost burden.”