Is E-Commerce Un-American?

A free Internet. It has taken the United States over 200 years and counting to interpret the rights of its citizens, but we’re supposed to accept the Web’s one inalienable principle at face value. Anyone who betrays it should be condemned for committing technological treason. But my guess is that frontier law lacked romantic appeal for those who actually lived by the six-gun, and few of us really want to go back there.

If the Internet is to help humanity evolve fully — and not just advance materially — then we need to give up the naive notion that we have a “right” to a cyber-society free of laws and regulation. We should welcome privacy laws and encourage government efforts to fight cybercrime. And we should swallow hard and admit that it’s only fair to pay the same taxes for an online purchase that we would pay in the real world.

Research or Propaganda?

The Pacific Research Institute for Public Policy just released a study asserting that taxing sales on the Web could cost the state of California 100,000 jobs by 2002.

Carol Migden, a San Francisco Democrat and author of pending e-tax legislation, said in published reports that the study is “dishonest.” She’s right. The study characterizes Migden’s proposal as an e-tax “expansion,” but in fact, the bill simply calls for applying existing tax laws to Internet sales.

The organization behind the report is not an independent research firm. Rather, it is a private group that has an agenda, clearly stated on its Web site.

The group exists to promote “a free economy, private initiative, and limited government.” The title of the report, “Internet Taxes: What State Legislators Should Know,” is enough to strongly suggest its purpose as a lobbying tool. In fact, its release was timed to coincide with consideration of Migden’s Net tax bill by California Governor Gray Davis, also a Democrat.

New Economy Math

But it is not my suspicion of slant in the study’s findings that causes me to agree with Migden’s harsh assessment; it is the report’s underlying presumption that economic concerns are more important than fairness. That is a dangerously dishonest corruption of American values.

Internet purists oppose taxation of e-commerce sales with the vague argument that because the Web started out free, it should stay free. Wake up and smell the latte, folks. The word “e-commerce” should be a big hint that the Internet has more in common with Las Vegas than the public library.

E-tailers argue that it’s too complicated to calculate the proper taxes for all the local and state governments that levy them, and thus they would be unfairly burdened by having to collect them and deposit the money into the right coffers.

It’s a persuasive argument — until you consider how easily e-commerce companies keep track of all kinds of details. They have records of my contact lens prescription and cheerfully let me know when it’s time to reorder. They know whether teen surfers like ‘N Sync better than the Backstreet Boys and peddle their CDs accordingly. Have you ever looked lovingly at a new car model online? Bet you soon received a nicely worded personal invitation to visit your local dealer.

But tax math is just too challenging for e-commerce to handle.

Piggy Bank Mentality

The latest argument put forth by the Pacific Research Institute implies that consumers shop online primarily to avoid paying sales taxes. In many cases, the sales tax “savings” offset only a small portion of the substantial shipping charges attached to most e-commerce transactions.

Shoppers have many reasons for taking advantage of the Web. It’s always open. You don’t have to deal with pushy salespeople. It has everything. My guess is that Internet shoppers will grumble when they are forced to add the local sales tax to their orders, but they will continue to shop, and in ever increasing numbers.

But even if that were not true, taxing e-commerce would still be the right thing to do, and deep down, every red-blooded American knows it.

Regardless of the difficulty and regardless of the consequences, it is simply unfair to require that brick-and-mortar stores charge taxes for items that e-tailers sell tax-free. It is unfair to force brick-and-mortar shoppers to pay taxes on items that Internet shoppers purchase tax-free.

What it amounts to is representation without taxation — otherwise known as a free lunch. Last time I checked, inequality was not considered the American way.