Taxing out-of-state sales

I enjoy not paying sales tax on things I buy from out-of-state businesses, but I never had an opinion on whether it ought to be that way. The constitutionality doesn’t bother me—how long has it been since that document mattered?

Today I ran across an argument that taxing out-of-state businesses would in practice be a bad idea.

Once you accept the proposition that a state where you don’t have offices or employees can tax you, it’s only a matter of how high that tax will go.

Increasing taxes that stores located in a state pay brings lots of heat on state legislators because in-state stores have employees, suppliers, etc., who are also in-state. Real voters are complaining.

If state legislators have the ability to set and increase taxes on out-of-state sellers, no voters in the state are going to complain. If California could create a tax that would require L.L. Bean of Freeport, Maine, to pay $1 Billion in taxes each year, they’d go crazy in Maine, but who cares in California? Bean could pay the tax or quit selling in California, leaving California merchants with less competition and more room to increase prices.

Too true. This happened long ago with hotels. Cities realized that they could impose a fairly hefty tax on folks who stay in them, and complaints are ineffective because those folks aren’t city or state residents. There’s no reason to think states will stop at leveling the playing field, charging the same tax to businesses in and out of the state. Why not an additional surcharge for the privilege of accessing their market?

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