Hawaii Web Tax Plan Makes It Into A Federal Case

Written by Evan Schuman
March 5th, 2009

While Hawaii pushes its Internet sales tax through its state legislature, it has become the latest in a long string of states trying to set rules for conducting commerce within its borders, with other states tackling everything from data privacy, payment security and RFID notifications. Of course, when it comes to global E-Commerce operations and national (and sometimes multinational) retail brick-and-mortar chains, a state’s border doesn’t have much meaning.

Some of the state legislation doesn’t even limit itself to dictating what retailers must do while operating in their states but are setting new rules protecting the residents of that state when they happen to be shopping out-of-state or online. Do they expect cashiers at Wal-Mart to ask what state a customer lives in and then, based on the answer, change the way they handle a credit card payment?

If ever there was a time for a federal judge to say to the states, “Don’t even try it. With an e-tailer or a retailer that operates in many states, only federal legislators can make the rules.”

Hawaii is actually trying to do a little more than act as a single state, mostly by trying to participate in the Streamlined Sales Tax Project, an effort with 22 participating states. That effort, though, makes the point. Even that kind of coordinated operation still represents fewer than half the states.

Regrettably, the feds are needed. Of course, the idea of encouraging members of the U.S. House and Senate to meddle with retail commerce issues is unsettling, but the image of 50 conflicting sets of state rules is far more frightening.


2 Comments | Read Hawaii Web Tax Plan Makes It Into A Federal Case

  1. James Tenser Says:

    It’s remarkable how stubborn this issue has been. After a decade of discussion, the Web remains a sales tax haven and our cowardly politicians haven’t settled on a common principle that would make the controversy go away. I wrote this in 2000 and I stand by it today:

    “The only righteous principle for determining which sales tax calculation to use for a purchase is that the law of the ship-to address must apply. Any other scheme will cause all the online retailer and catalogers to relocate to the Cayman Islands.”

    True then. True now. The states and municipalities need the sales tax income. The nation needs a level playing field. Retailers need to know where they stand. And consumers pay through the nose, as they always do.

  2. Rob Martell Says:

    e_tailers in the Caymans? Just like all the credit card companies ‘located’ in South Dakota so they can charge 30% loan shark rates.

    Sales taxes in and of themselves are wrongheaded, and just another example of politicians and advocates who want the easy way out. Sales tax is like cigarette and liquor taxes, they tax things you don’t really notice as much as you would a paycheck deduction or a require tax payment, and put reasoning in that sounds good. My state wanted to increase it from 5% to 6% and even the newspaper extolled it as ‘only a penny’ increase. Ya, sorry, but that is 20%.

    Until you have to fill out a vendor’s state sales tax returns!
    That is an expense for vendors that is never mentioned.

    There already are OVER 50 jurisdictions, if you have nexus in all states. Many states have State, County, City and Local taxes. I used to have to fill out tax forms for shipments to around 25 states and keeping up with the locations of the receiver (what county and township is this address in) was bad enough, but then there is the whole list of what is taxable and what isn’t!! It was a nightmare to keep track of, and try to program.


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