The Taxman Has Designs on the Net
Pages: 1, 2, 3, 4
Landon: It's too long a discussion to get into, but I disagree. The current case is not the same as this particular situation, in my view. It's something -- whereas -- the legislative analyst disagreed with that when he looked at the Migden Bill.
Turner: The BOE's own attorney said just the opposite of that. I know lawyers can disagree on stuff, but there's certainly that question that's going to be out there--
Landon: Yes, but a legislative analyst had nothing to gain or lose from this, and so presumably it's reasonably unbiased. In fact, they're looking at whether they are doing something that might put the State in the situation of having a lawsuit brought against them. In his view, this was not -- this was just clarifying existing law.
Tyler: Let me make some observations here. I think that it's interesting that the Internet tax debate has produced an opportunity where businesses are actually asking government to tax other businesses so somehow that would level the playing field. To me that's sort of, somewhat unprecedented. The businesses that are brick and mortar stores -- which have every opportunity to also sell their wares online -- what the businesses should be calling for is to get rid of the sales tax that the brick and mortar stores should collect.
The Internet companies, they all do pay taxes. Wherever they're located, they pay property taxes. If they have trucks, then they pay the regulations, the fees, taxes. They pay payroll taxes, they pay workers' compensation taxes. They pay lots of taxes, and all their employees who go out and buy things, they all pay taxes, and they pay income taxes, presumably in California as well.
So it's sort of a myth to say that these companies aren't paying taxes. They are paying taxes. But let me speak to the competitive issue, because this is reasonably interesting to me because I recently purchased a television and VCR.
Now, for both items I actually went to a brick and mortar store, and I did most of my research online. I ended up buying the television at a local retailer after I'd researched it online and found out that this was indeed the best TV for the best price that I could buy, and I went and picked it up. My wife, child, and I are gladly watching a beautiful color TV at home right now.
I ordered the VCR the day before I picked up the TV, which was about fourteen days ago. I didn't pay tax on the VCR, but I still don't have it. It hasn't arrived yet.
With the TV, I did a whole series of things for which I paid a tax, and for the VCR I didn't. What I didn't do with the VCR is, I didn't get in my car. I didn't start it up, I didn't burn fossil fuel all over northern Virginia. I didn't speed, so I didn't need to have law enforcement keep track of my speeding. I didn't get in a horrific accident where the local fire and rescue had to come and rescue me. I didn't tie up traffic and I didn't wear out the roads. I didn't park in their parking lot. So, there's a whole series of services that I didn't use to buy the VCR, so in a sense, not only did I not pay for them --
Landon: But what about the UPS truck that does deliveries that doesn't do any of these things either?
Tyler: Of course they do, but UPS pays taxes. They pay dearly to use the roads. They pay dearly on business taxes.
Landon: Yes, but they're doing an extra stop to you. And to say that you're not using the services --
Tyler: It's far more efficient for UPS to go and collect all the items and then to deliver them in one truck than it would be for all the millions of consumers to go out and do the same thing.
Turner: This is a great example because I think that what it illustrates is the dichotomy. Because the problem with what the proponents, I think, are suggesting is happening is not that when you purchase the VCR or TV, you already paid taxes in northern Virginia for all of those services you're getting. It's the out-of-state company that's the one selling to you that they're somehow saying are doing business in the state. If that company is the one that's supposed to be collecting and remitting the tax on behalf of Virginia, what precedents do they have in Virginia to warrant the extra territorial tax?
Tyler: That's precisely the point.
Turner: Is it merely being on the Internet that's sufficient for you to have to pay taxes? Not just in California, Nevada, or Florida -- what happens here is going to happen globally. You've got to do this for California and Florida. The Europeans are going to want you to do it for them. Everybody in South America, Canada, and everywhere else --and pretty soon, in order for you to sell on the Internet, you're going to have to collect and remit, not just everywhere in the United States, but globally. Isn't that going to be a great impedance to the growth of commerce?
Tyler: I don't think it would actually work that way. I think actually companies, if Gray Davis signs the bill of the law, would consider moving up to Oregon. Then, if it becomes a national thing, companies would decide to move right across the border and then continue to do business and not pay the tax.
