One method is to apply the state sales tax to online transactions.
The formative years of the Internet saw a tax holiday of sorts declared by the federal government. Firms selling products online did not have to collect sales taxes and remit them to the states in which the buyers resided. Long established businesses cried foul because they said it was unfair competition.
The federal government chose to ignore the protests and considered the business tax collecting exemption aspect for Internet sales to be an aid in building out the infrastructure.
This exemption did not apply to individuals. Persons buying things online that are ordinarily subject to sales tax are technically liable for the tax. Obviously, the rate of compliance was not particularly high.
In Wisconsin there is a line on the income tax form where the individual declares what he should have paid in sales tax on out-of-state purchases either online or by mail. This self-declared tax is called the use tax. It applies to coin purchases, bullion coin purchases, etc.
Now Wisconsin is looking to become even more aggressive. It wants to follow the lead of New York and mandate that sales taxes be collecting by out-of-state merchants.
Will this proposal pass into law? It is hard to see how the state legislators can resist the idea. They want more money. Imposing obligations on out-of-state firms has no internal political consequences.
I assume other states are working along these lines as well.
What’s happening in your state? Let me know. Post a comment here.