Senator cries tax tyranny as Amazon law moves forward

A conservative Republican claims a plan that will allow states to tax online retailers is “taxation without representation” and that it will punish internet entrepreneurs.

Sen. Jim DeMint (R-S.C.) made the comments in the Wall Street Journal to oppose the Marketplace Fairness Act, a bill intended to curb the advantage that sellers like Amazon (s amzn) (whose large online sales led to the bill in the first place) and eBay (s ebay) have over traditional shops. Right now, the online retailers can sell cheaper because they don’t have to collect sales tax in states where they don’t have a physical presence.

The “fairness” argument appears logical and enjoys bipartisan support, but DeMint argues that it could lead to companies having to engage with thousands of state and municipal taxing authorities. He raises the example of a small business in South Carolina facing simultaneous audits from California, New Jersey and Hawaii:

The burden on Internet entrepreneurs could be staggering. There are already nearly 10,000 state, local and municipal tax jurisdictions to navigate nationwide.

DeMint’s arguments may be alarmist. The law, as it stands, would not apply to firms that sell less than $500,000 a year and lawmakers are also working to create a simplified method for sellers to collect tax across states. But DeMint also raises the interesting questions about how far internet-related taxes could be applied in the future: downloading taxes? a national online sales tax?

Despite opposition from DeMint and companies like Overstock, the law appears set to pass. Amazon itself, under pressure to pay from a growing number of states, endorsed the bill earlier this summer.

This means consumers who don’t live in New Hampshire, Oregon, Alaska, Montana or Delaware should get ready to pay more for online purchases.

(Image by Michael D Brown via Shutterstock)