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Preliminary State Pact on Online Sales Tax
Posted by James Grimmelmann on Tuesday, November 12 @ 21:30:48 EST Governance
The Washington Post reports that "lawmakers and tax officials from 30 states -- including Virginia and the District of Columbia - endorsed a proposal to simplify their tax laws and enter into a voluntary pact to collect online sales taxes."

Under the proposed deal, states would devise a uniform scheme for classifying goods and services; each state would then set a single tax rate for each category. In order to get around the enforcement problem, online merchants would be given a cut of the take, as an inducement to play ball. The deal would only take effect once 20% of states had gotten on board by passing the appropriate laws. The WP article is full of quotes from doubting Thomases: small e-tailers may be the big losers. Privacy concerns could also be a big worry; the proposed plan looks like it might have companies turn over personally identifiable information on some customers.

Further complicating the picture, the legal status of these "contracts" between states is unclear. In New York v. United States, the Supreme Court allowed New York to back out of certain terms of an inter-state deal on the handling of nuclear waste (even though Congress had "blessed" the deal by passing it as a law). If Congress doesn't play along in the sales tax game, states may have trouble enforcing tax policies on companies outside their borders; if Congress does join in the fun, it might be seen as an impermissible intrusion on state autonomy.

 
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