Cyber Monday Arrives Amidst Uncertainty On Internet Taxes

Michi Iljazi

December 1, 2014

Today is “Cyber Monday,” the busiest online shopping day of the season. And, with millions of Americans grabbing as many deals as they can from their favorite websites, there’s no better time to remind elected officials that the time is now to permanently extend the moratorium on internet access taxes; and to tell lawmakers that an Internet sales tax has no place in an ever-expanding online economy.

The total tally for online shopping won’t be know for a few days, but Cyber Monday will certainly bring in a great deal of online sales to many businesses. Lawmakers should look at last year’s numbers as their guide as to why the Internet should remain free of taxes. According to data obtained shortly after last year’s Cyber Monday (December 2, 2013) online sales totaled more than $2 billion and shoppers were going online to buy with more than just a computer, according to USA Today:

Cyber Monday sales rose 16% to a record $2.29 billion, according to Adobe Systems, which tracks activity on roughly 2,000 U.S. retail websites. IBM’s Digital Analytics Benchmark, which tracks transactions from about 800 retail sites, put the sales increase at almost 21% compared to a year earlier.

Cyber Monday is the first full work day after Thanksgiving when employees get back to their desks and use their office computers to buy gifts. But with the recent boom in mobile devices like smartphones and tablets, online shopping has expanded beyond this traditional activity.

This year’s Cyber Monday capped the highest five-day online sales period on record, according to IBM. From Thanksgiving Day through Cyber Monday online sales climbed 16.5% percent over the same period in 2012. Mobile devices accounted for more than 17% of Cyber Monday sales, up 55% from last year.

The moratorium on Internet Access Taxes is expiring on December 11th after a five-week extension from September’s stop-gap spending bill (continuing resolution) and the amount of internet traffic by shoppers would have certainly been much less if there were a tax just for going online. This would in-turn hurt sales, and further show just how damaging new taxes can be to am internet that has been so important to the global economy.

Will Rinehart of American Action Forum recently wrote about the costly impact that taxes on Internet access would have on millions of online users nationwide:

By our estimates, letting the Internet Tax Freedom Act sunset could cost consumers $14.7 billion a year in taxes if Internet access were subject to the countless taxes of wireless service. With businesses and families already feeling the brunt of the high taxes and a slow recovery, a new tax could hurt this dynamic part of the economy.

Nearly $15 billion dollars a year from internet access taxes will do damage to the buying power of the very consumers who are using the internet to make Cyber Monday the economic success it has become.

The second important Internet tax issue is the ill-named Marketplace Fairness Act (MFA), which would open the flood gates of sales taxes on Internet purchase.  MFA already passed the Senate but is said to be “dead on arrival” in the House. Taxpayers and consumers should be encouraged by the recent talk from House Speaker John Boehner (R- Ohio) who emphatically put the nail in the coffin on any kind of Internet sales tax.

This is welcome news, especially considering a new study by the National Taxpayers Union that shows just how much MFA would cost consumers.  According to the study:

  • The MFA’s provisions for remote sales tax collection could amount to $340 billion over the next ten years.
  • Nationally, the average impacted household would pay an additional $360 in state and local sales taxes in 2015 if MFA were implemented.
  • Nationally, the burden of state and local sales taxes on families would increase by 5.9 percent on average. Households in some states would pay up to 16 percent more in sales taxes.

Simply put, there’s no good reason for any politician to delay the permanent extension of the internet access tax moratorium nor institute an online sales tax. The Taxpayers Protection Alliance (TPA) will keep tabs to see just how much Cyber Monday takes in and will be eager to remind elected officials in Washington D.C. just how much their constituents would be harmed by taxing the internet.

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