Rapid technological change has a way of leaving oddities in its wake. Look no further than the VHS tapes stacked in your closet, or the lonely pay phone at the corner gas station. Or the fact that you pay sales tax on purchases at local stores but not on those at many online retail sites.
The exception for certain Internet purchases might seem like a good deal for consumers. But taxing brick-and-mortar stores, while exempting many of their e-commerce competitors, has a number of negative effects. Among other things, it:
? Punishes stores that hire locally, are involved in the community and generate foot traffic that helps other nearby businesses.
? Subsidizes big Internet retailers, while hurting conventional stores that include many mom-and-pop shops.
? Forces cash-strapped states to raise other taxes, or go into debt, to compensate for the $23 billion in annual uncollected e-commerce sales taxes.
What's more, the impact is growing worse by the month. Online retail, barely a radar blip in 2000, is now a quarter-trillion dollar industry, one projected to double in roughly six years.
All this makes us pleased to report that states are getting closer to winning permission from Congress to tax all sales the same, whether they come from a corner grocer, a nearby Wal-Mart, or an online site such as eBay.
The congressional nod is necessary because, back in 1992, in a mail-order case that preceded e-commerce, the Supreme Court ruled that states don't have the legal authority to tax sales from vendors that don't have a "physical presence" within their borders.
The Senate began debate this week on a measure, endorsed by the Obama administration, that would grant such authority. States that opt to collect these taxes would have to meet a threshold of having a relatively simple tax code. And businesses with annual sales of less than $1 million would be exempt.
The only real question about the bipartisan plan is why it took so long. For years, online merchants threw up objections.
First they said they needed special protection to help incubate their fledgling industry. That argument became less and less viable as e-commerce became more and more profitable. Then the Internet retailers insisted that they couldn't possibly be asked to keep up with 50 sales tax codes, with thousands of variations in localities. Never mind that computer programs can do that easily, or that national brick-and-mortar chains have done it for years.
Finally, the tide seems to be turning in favor of the states and conventional retailers pushing for equal tax treatment. Even Amazon, which collects sales taxes in states where it has distribution centers, is now for it because the company is moving toward same-day delivery.
A law treating all sales equally for tax purposes is long overdue. Now it's time for members of Congress to show that even if they can't keep up with technological change, they can at least catch up to it.