Supporters of this tax argue that this tax is not a new tax. Not only is it a new tax, it is a grotesque tax: a violation of the principle, “no taxation without representation.”
Republicans in the Senate voted for this tax, all in the name of a fantasy: “It really is not a new tax.” On the contrary, it really is a new tax. I hope Republicans in the House of Representatives will see this, and will vote against H.R. 684, the so-called Marketplace Fairness Act. This proposed tax is unfair in a way that few other taxes are.
Let us consider a real-world situation. I have GaryNorth.com subscribers who live outside the United States. For all I know, they live in jurisdictions in which there are sales taxes. I deliver information to them in digital form. They presumably do not pay a sales tax on whatever they have paid to me to become subscribers. I see no way for a foreign government to impose a sales tax on a digital transaction that takes place between someone inside the government’s jurisdiction and someone outside its jurisdiction.
GOONS FROM ABROAD
Let us assume that I am contacted by that foreign government. I am told by email that it is my responsibility to collect the sales tax from the resident of that nation. Therefore, I am informed, the government is requiring me to find out what the rate of taxation is in that nation, and to immediately remit that tax to the government. What should I tell the government?
I will not respond to the government. I will act as though I never heard from the government. How is that government going to prove that I ever got the message, that the message did not go into my junk file? Why create problems? I do not think the government can do anything to enforce the claim.
But what if it is a really serious government? What if the government is so serious that it wants to make me the poster child for businesses dealing with residents of that nation? What if that nation sends over a squad of goons, and the goons threaten to arrest me? What if the goons have the power to do this? Should I pay the tax? I think I would pay the tax. I do not want to be kidnapped by goons, hauled to a foreign country, tried for tax evasion, possibly sent to jail, and leave my subscribers and family without access to me or my information.
You may say that this is impossible. It is not impossible. It is simply expensive. The government could do this. There were times in the past when the Soviet Union did do this kind of thing, although not on issues of sales taxes. A government that wanted to enforce a sales tax on me could do so at some price. What protects me is the fact that the price is too high. Also, the United States government does not look favorably on foreign governments that send agents into the United States to kidnap tax evaders. It is a matter of turf. It is a matter of jurisdiction. It is a matter of the defense of the jurisdiction of the federal government against interlopers, not any big commitment to my freedom as an individual. The feds want to get tax money out of me. They does not want to share this revenue with foreign governments.
I receive no benefit from that foreign government. I have neither a judicial covenant nor an economic contract with that foreign government. If that foreign government wants to tax the individual who bought a subscription from me, that is between the buyer and that foreign government. It has nothing to do with me. I am not under its jurisdiction, and therefore I should not be used as an unpaid tax collector for that foreign government.
We are talking here about invisible lines called borders. They are judicially relevant lines. They establish the limits of the jurisdictions of civil governments. Civil governments defend their jurisdictions, which means they defend their citizens. If their citizens remain inside the borders of a particular government, the government feels required to defend its citizens from invasion by other governments, because such an invasion is ultimately an invasion of a particular government. It is a matter of turf. It is a matter of competing jurisdictions.
If this is logical so far, then I want to extend the same line of argumentation to invisible borders between states, meaning jurisdictions within the United States. If the logic that I presented so far applies accurately to borders between nations, then the same logic applies to borders between states.
If I commit a crime while I reside in my state, and the victim resides in another state, then the other state has the right to call for my extradition to be tried where the crime took place. Maybe I am a digital bank robber. I have robbed a bank in another state, but I never entered the jurisdiction of that state. Then it is a matter between states. It is a jurisdictional dispute.
If a foreign state wants to impose a penalty on me, because I have committed a crime, it can go through the procedure of extradition. That is an expensive procedure. The cost of that procedure protects me. But it also protects you.
(For the rest of my article, click the link.)