Sell Globally, Tax Locally

Senator James DeMint (R-SC) has a very fine op-ed in today’s Wall Street Journal, opposing pending federal legislation that would permit state and local governments to impose sales tax collection obligations on internet sellers even if those firms have no physical “nexus” (such as a store or warehouse) in the taxing jurisdiction.  The legislation would compel sellers to calculate and remit taxes for customers in thousands of jurisdictions with differing tax rates, bases, holidays, exemptions, etc.  As the Senator rightly notes (and as I’ve argued here), we don’t impose such obligations on local sellers: the transaction at your supermarket or corner store is subject to the seller’s tax regime, not the customers’. As I’ve argued at greater length here, this “origin principle” would also make sense for interstate sales. That is not going to happen: state and local governments loathe origin-based taxation because it entails vehement tax competition. Still, much would be gained if Congress could bring itself to reject proposals that would authorize taxation and regimentation on a wholly extraterritorial basis.