Taxing All Internet Sales Is Consistent With Support for Small Businesses

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Thursday, 12 December 2013 10:33

A NYT blog post by Robb Mandelbaum noted the findings of a study showing that more than 40 percent of Internet sales would escape taxation if a small business exemption was put into the law. The last paragraph tells readers:

"Somewhat surprisingly, given their claims to unwavering support for small businesses, House Republican leaders appear to be leaning toward legislation that would offer no small-seller exemption at all."

Actually, this is not the least bit surprising. The current exemption of Internet sales from the requirement to collect sales tax is comparable to exempting stores whose addresses end in the digit "3." This rule would effectively subsidize businesses whose last digit ends with "3" at the expense of other businesses.

There is no reason to have such a subsidy even if some of the firms who might take advantage of it are small businesses. The same applies to Internet sales.