Supreme Court Online Sales Tax Ruling Addresses Part of the Problem



By Dr. Kevin McNamee

Sales tax is considered by economists to be one of the most equitable methods to raise revenue because it is based on consumer’s freedom of choice and is more transparent when compared to income tax rates. 

In an effort to stimulate internet growth and online sales, Washington policy makers exempted online purchases from sales tax. This 1992 policy did not hurt the local small business, brick-and-mortar, retail stores because, less than 2% of American’s had internet access. Today, that number has grown to about 89% and so have the growth of online sales. 

Supreme Court Justice Kennedy wrote that, “The internet’s prevalence and power have changed the dynamics of the national economy,” He added that online sales have cost the states as much as $33 billion in sales tax revenue each year. 

As consumer buying behavior shifted from the local mall and Main Street to the internet, the tax-free online sales growth resulted in lost state sales tax revenue and loss local business sales. It placed the brick-and-mortar stores at an unfair disadvantage resulting in falling sales causing local business closure, increase retail vacancy and more job losses.

The Supreme Court decision was limited to sales tax of online purchases only. It did not level the playing field completely because it did not address non-online purchases that are shipped across state lines. 

Consumer’s vote with their pocket book and feet. When consumers can avoid paying out-of-state sales tax, they will.  The “other than by online” out-of-state purchase allows consumers to avoid reporting or paying state sales tax. 

Businesses on Main Street benefit if Congress requires all businesses charge “other than by online” out of state orders the sales tax rate for their state.  The collected sales tax are forwarded to the federal government who distributes the sales tax revenue to each state, similar to current sales tax reporting to its state agency.

Result is Main Street will keep in-state customers leading to increased sales, increased sales tax revenue and businesses hire more employees lowering unemployment.

Main Street businesses are suffering because Congress is not listening. The Supreme Court decision goes a long way to level the playing field, but more needs to be done by Congress to avoid the inevitable – customers placing their out-of-state orders by telephone instead of online.

Kevin McNamee

Dr. Kevin McNamee, a 2018 candidate for the Thousand Oaks City Council, is a 20 year resident of Thousand Oaks and business owner for over 28 years. He is an instructor at Ventura College in the Water Science Department. As a member of the Thousand Oaks Rotary, he volunteers his acupuncture and chiropractic clinical services at the Westminster Free Clinic to many of the city’s illegal immigrant and under-served population. His practice specializes in acupuncture, chiropractic, Asian and herbal medicine, blended with traditional Western diagnostics and treatment protocols. In addition to his practice, Dr. McNamee provides pain prevention services to organizations like the Los Angeles Police Department. Dr. McNamee’s Anti-Drug presentations for middle and high school students have helped change student attitudes about illegal drug use and abuse. 

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