Buying the latest knick-knack off of Wanelo may become a little more expensive soon. The House of Representatives is preparing to vote on legislature that would mandate the payment of sales tax on Internet purchases. This legislation hurts small online retailers and should be adjusted to promote small business growth.
Right now, if a Maryland consumer buys from an online retailer that doesn’t have a physical residence in the state, they don’t have to pay a sales tax on their purchase. Maryland does have a sale tax, so technically, the consumer should calculate that tax and pay it.
This legislation, called the Marketplace Fairness Act, would make paying this tax mandatory.
It is nonsensical to pay money to a state where a retailer does not physically exist. Doing so would be as logical as a Marylander driving to Pennsylvania to buy something, and rather than paying Pennsylvania’s tax, this person would pay the tax to Maryland.
Businesses that make over $1,000,000 through Internet sales would have to collect the added tax from their customers and pay that to the states where purchases are made. Aside from forcing customers to pay another tax, this act would make transactions more complicated for small retailers because sales tax differs from state to state.
Only four percent of small businesses made over $1,000,000 in the past year, but the hefty taxes could stifle their growth. Large online retailers like Amazon have endorsed this act because it would weaken its smaller competition and because it already has a physical presence in many states near metropolitan areas which allow it to keep prices low.
The beauty of our capitalistic society is that competition drives the market. When big corporations feel threatened, it is both wrong for them to lobby for legislation to bring down their competitors and for legislators to give them any attention. In order to better accommodate smaller online retailers, Congress should pay attention to eBay’s pleas of increasing the exemption to retailers making under $10,000,000.
Chioma Iheoma is an Opinion Editor for The Patriot and jcpatriot.com.