Stupid Idea: Federal Sales Tax Supported by PMA


Congress has started legislation to start a possible federal sales tax, specifically aimed at online retailers. The Performance Marketing Association, has expressed support on this idea, pointing out that it is a better idea than having tons of State Nexus Taxes.

“There is a real sense of urgency for this legislation to become law. If Congress doesn’t act quickly, there are 60,000 small businesses that have had their incomes seriously constrained. Other states impatient for some sort of action, will pass affiliate nexus tax laws even though they are futile and ineffective, putting additional small businesses at risk. We need a Constitutional framework that provides states with an equitable sales tax collection policy for all businesses,” says Rebecca Madigan the Executive Director of the PMA.

The bills have support from brick and mortar merchants, such as Walmart who have seen their revenues hit by more and more people turning to the internet instead of shopping in person.

Ebay on the other hand does not support the federal sales tax measure, pointing out that it will significantly hurt small sellers on EBAY. Tod Cohen, Ebay’s Deputy General Counsel said that eBay Sellers have actually seen decreases in electronic commerce sales the last two years, as Amazon and other stores gain.

In my opinion the PMA has a lot of explaining to do in supporting this.  Many of their members, and more importantly the entire Internet marketing system depend on the lack of sales taxes. While I understand their concern about having multiple state taxes, as they have pointed out in their own fight against it, those laws will eventually be considered unconstitutional.

Small businesses have been able to strive online because of this advantage of not having taxes. Large businesses like Walmart, Target are completely disingenuous in claiming that they are at an disadvantage, because they get tons of tax breaks from local, state and federal governments that small businesses don’t get.

Also, the PMA is ignoring the fact that a federal sales tax will create a significant issue if its applied to dozen of other types of transactions, including lead generation and site memberships. Do we really need to have to charge consumers when they join a dating site?  In this depressed economy the online entrepreneurs are what are sustaining us. Supporting a bill that helps the big businesses at the expensive of small business is a really bad idea.

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