Overstock CEO: Web Sales Tax Unfair
Sen. Mike Enzi, R-Wyo., has been working on legislation that would let states impose the local tax on Internet sales where the seller is out of state. That's going to hurt e-business, says Patrick Byrne, chairman and CEO of Utah-based Internet retailer Overstock.com. National Journal's Winter Casey sat down with Byrne on Friday, when he was in Washington to discuss education reform. Edited excerpts follow.
NJ: What are your thoughts on Internet taxes?
Byrne: We have been supporting a permanent moratorium on Internet taxes. It doesn't make sense for the states to be taxing the Internet for a number of reasons. First of all there's the Supreme Court decision from 15, 16 years ago, where the Supreme Court said, "Look, it's just unreasonable to expect somebody in the catalog business to know the different taxes in 7,000 jurisdictions."...
Now the argument is being made that it would be possible to overcome that inexpensively -- a couple hundred million dollars, say -- with technology to keep track of the tax rates on every product in 7,000 jurisdictions. They haven't done that, and even if they did I'd say it's not fair because we and other catalogers and Internet companies, we don't put the same load on the local infrastructure that it does to have a retail store there. We don't have employees, we don't have kids in school there and so on and so forth, we are just based in Utah and use UPS and FedEx. We don't put the load on states' budgets that a local brick-and-mortar retailer does. Therefore it is not fair.
NJ: What is going on with the states on the Internet tax front?
Byrne: There was a sharp movement earlier in the year to start taxing Internet sales. I know in California at least the issue lost momentum right away.... New York has given it a try and what they have said is, "You have to start paying tax in New York if you have nexus and we, New York, are going to define nexus very broadly to include just having affiliate marketers," and affiliate marketing is sort of the grassroots marketing of the Internet.
As soon as they passed that -- we had 3,000 affiliate marketers in New York, 300 of whom made something in the thousands of dollars, at least, for doing it. And so we just had to cut our contracts with all of them, so it basically cost a few hundred people in New York a significant portion of their pay. That's what other states are going to do, and the more they do it we'll just cut any relationships with affiliate marketers in those states.
NJ: What policy issues do you hope Congress does something about this year?
Byrne: The biggest domestic issue to me is educational choice. I see the left and the right fighting about what are really a lot of downstream effects. If you are concerned about social inequality, income inequality, racial inequality and so forth, that's all generated by horrendous disparities in educational outcomes.... If we could fix the education system, a lot of our problems would clear up over a generation. But if we can't fix education, we're just rearranging the deck chairs on the Titanic.
I don't think there is any way to fix education by just pouring more money into it. The evidence is strongly against that. The only way to fix education is to introduce a choice. As soon as we can have a market of some kind -- choice can be charter schools, it can be vouchers, it can be tuition tax credits -- but as soon as there is choice of some kind, the system has to respond and start delivering better value.
Join the Discussion
The National Journal Group has the right (but not the obligation) to monitor the comments and to remove any materials it deems inappropriate.
Comments powered by Disqus