The Taxman Has Designs on the Net
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Pizzo: There's all kinds of contradictions. This is one of those political issues that sort of finds strange bedfellows and finds conservatives, for example, in this case on the side of an issue they're usually not on.
I am surprised to find that a group that normally would support states' independence and states' rights is saying to these states that want this tax, you can't have it. Now either these states have the right to tax commerce within their borders, or maybe we go from a one-world vision to a one-country vision. I mean, just abolish state borders?
Tyler: I don't think that's going to happen, I think it's the competitive nature of the governments. What they need to figure out is that more is less and less is more.
Pizzo: A lot of these are Republican governors.
Turner: The states' rights argument, though, I think is something of a misnomer. I know that a lot of Republican governors out there have argued about states rights. But that all fits into the context of the Constitution. If you go back and read the Federalist Papers, and you may not think they have application in the context of e-commerce, but they really do. Madison talked extensively about how there needed to be Federal power in order to limit the states from dealing with tax commerce that's going intraborders.
Tyler: According to Congress, the clause could allow Internet taxation. between the States. They have chosen not to. The Constitution doesn't say you can't do it. It gives the Congress the power to do it, and they've said, "No, we're not going to."
Pizzo: I'm going to direct this at Hut. Somebody once asked on a different subject why it was so hard to implant capitalism in the former Soviet Union, and a Russian told the following joke that sort of tells why. There were two neighbors living across the road in a rural area. One had a cow and one didn't. The one with the cow was able to sell milk and had more money. The one who didn't one day went to the door, and there was a genie there that said, "You have one wish. What is your wish?" And her wish was "Kill my neighbor's cow."
Is that sort of what the independent booksellers are saying in asking the State to tax the online people -- kill my neighbor's cow?
Landon: I don't think so at all. I want to make clear that we're not opposed to the Internet. We're all going onto the Internet ourselves, with our own sites, which we have to pay and collect tax on. The notion that if someone goes to barnesandnoble.com and now suddenly has to pay tax on it, suddenly that's going to drive them back to my store and somehow hurt Barnes and Noble, because people aren't going to shop there anymore, I think is a little bit much. It certainly makes a difference--we just want to compete.
I really think this is an issue of retail is retail is retail. The fact that you can go to barnesandnoble.com and buy a book and return it at a Barnes and Noble store -- to say that that barnesandnoble.com doesn't have a presence in California and isn't doing business in California is ludicrous. Barnesandnoble.com is just another arm of Barnes and Noble in this instance.
Turner: But you use facts that don't exist in the context of the statute that is being proposed by the bill. If you're talking about where someone buys from barnesandnoble.com and returns it to Barnes and Noble--although I don't think the specific issue necessarily has been litigated -- but I would think that that creates real nexus issues. I think that there are probably a lot of people who would suggest that that probably is nexus. I think the bill goes kind of beyond that, though.
Landon: Well, it says more than that, but that's part of cross-promotion.
Turner: But that's existing law. I think if they're taking returns from the dot-com affiliate, I think that that's within the context of nexus under current law.
Landon: I would love to have you tell the Board of Equalization that, because when we told them that, they said no.
Turner: I don't think that's actually accurate of what the BOE said on that issue.
Landon: Actually what they said was, they weren't willing to.
Tyler: Well, understand where they're coming from. Having been on the other side of some of their audits and such, I know that they're pretty aggressive, and particularly on nexus.
It may not happen as fast as the Internet economy seems to be developing. After all, taxation issues aren't known for their speed of enforcement to begin with. To suggest that the BOE (which I think is a part of the unfortunate premise of the bill) is not enforcing the law, I think is a misconception, and I think a misrepresentation of what has actually been going on with the BOE.
Landon: Okay, well, I'll accept that. The BOE has done nothing and has given us no--
Tyler: No, you have no evidence that they've not done anything, which is really different--
Landon: They have, that's true.
Tyler: That means that you're not going to feel at ease until you feel like Barnes and Noble is being essentially brought up on audit on these issues. But I can just say that I think that the cure is kind of worse than the disease.
Stephen Pizzo is an award-winning non-fiction author, and newsman for the O'Reilly Network.
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