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Corbett's tax hike: Retailers, not the state, must collect on online sales
Friday, November 04, 2011

Imagine if the Pennsylvania Turnpike asked every state resident with a driver's license to file a form each year, stating the number of miles traveled on the highway and remitting the proper tolls. That's crazy, right?

A few meticulous types would keep records and pay the correct sum, but most people either would report no travel and pay no toll, or guesstimate and get it wrong.

The latest scheme out of Harrisburg -- from the ostensibly anti-tax Corbett administration -- will apply that flawed methodology to sales tax on items purchased online. It won't work.

What's worse is it's a double-cross of the voters who thought they were sending Republicans to Harrisburg to halt rising taxes.

Gov. Tom Corbett's Revenue Department is planning to include a new line on the 2011 income tax forms that will require filers to report what they spent on online purchases that went untaxed. Pennsylvanians who don't want to do the math will be allowed to use an estimate based on their income.

What's likely is that many taxpayers will report zero, which means many of them will be lying. That's been the experience in other states, including Ohio, where just 46,476 of its 5 million households complied last year.

Even the backers of Pennsylvania's plan aren't optimistic. The department says the effort will net just $5 million to $6 million next year, less than 2 percent of the $380 million that is lost because online retailers don't collect the tax.

The Corbett plan has other problems. Pennsylvania's sales tax code is riddled with exceptions. Will the average tax filer know which items are eligible for tax and which are not?

This reporting and collection method is so vague and imprecise as to call the plan's validity into question. Given that, it's a hamfisted power play by Big Government to squeeze whatever tax revenue it can from average Pennsylvanians. And these are Republicans?

If Pennsylvania sticks with this plan, most taxpayers will probably sidestep the tax, those who use the income-based estimates probably will pay too much and online merchants will be able to elude a basic obligation of doing business -- to collect and remit sales taxes.

The U.S. Supreme Court created the loophole for online sales in 1992, when it ruled that catalog retailers had to collect sales taxes only for states in which they had a physical store. Later, online businesses said they needed the same consideration because the Internet was new and society couldn't afford to squelch the budding technology.

Well, there's nothing new about online now. The Internet is robust and well developed. It's time to treat online retailers like their brick-and-mortar cousins. They need to collect their own sales taxes.

The only way to solve this problem is with a national solution, not leaky state-based efforts like the plan of the Corbett administration. Congress must mandate that all retailers collect and remit appropriate sales taxes from their customers -- and let the states stick to revenues they can accurately and reliably gather.


First published on November 4, 2011 at 12:00 am