February 1, 2003

Ignoring Facts, Constitution

Online shopping makes up less than 1.5 percent of total retail shopping. It is miniscule. But The Tennessean is hot to have it taxed. Their editorial on the subject is a mishmash of half-truths and shouldn't be taken seriously. For one, the main problem with taxing online sales is the Commerce Clause of the federal constitution, and Congress can't legislate around that. The Commerce Clause forbids states from levying taxes outside their borders. Under that clause, Tennessee may not force a merchant in Kentucky to collect Tennessee's sales tax if the Kentucky merchant does not have a physical presence in the state of Tennessee at the time of the transaction. Online merchants in other states that do not have a warehouse or other physical presence in Tennessee can not be required to collect the Tennessee sales tax when they sell something to a Tennessee resident and ship it to them. (They would have to charge the tax if they delivered the item.)

A company that has no physical presence in Tennessee does not charge sales taxes. This is fair - the company puts absolutely zero strain on any Tennessee government-provided service.

More later.