OUR VIEW: Internet tax law destroys livelihoods (vote in poll)

Everyone wants to tax the Internet. Colorado’s new effort began on March 1, and it’s not going well.

The Internet could generate tax revenue like manna from Heaven, if changing its nature were a simple matter of passing a law. Under our new law, someone selling a Kewpie doll from Dallas to a customer in Denver should calculate the sales tax and report the transaction to Colorado tax officials.

In traditional retail, an out-of-state wholesaler sells tax-free to a retailer in Colorado. The retailer resells the goods at a price that includes all sales taxes levied in the location of the seller. Internet sales circumvent that system.

State politicians may learn the hard way they can’t simply pass a law and command control of the Internet. The Internet is a rogue technological behemoth that seems to loathe its own creator — government.

John Gilmore, a libertarian computer science innovator, shared a slice of wisdom in the 1990s that everyone should learn: “The Internet interprets censorship as damage and routes around it.”

No truer words have been spoken about this modern age. The Internet lives like a wild stallion that cannot be tamed. In a world abundant with aggressive collectivists of all ideological flavors, the Internet serves as a great liberator of the individual. Most government efforts to control Internet content have failed. The few that have enjoyed short success have ultimately suffered from the Internet’s ability to interpret centralized planning and control as a threat for the individual to avoid or conquer.

Today, because of the Internet, the individual is empowered like never in the history of humankind. Elitist, top-down journalists and politicians controlled the message just 20 years ago. Today, they must compete with individuals who have the option to instantly address the masses and challenge the institutions of power.

Freedom of the press once belonged only to the few who could own a printing press; today it belongs to anyone with a personal laptop computer or access to a public library’s computers or a nearby Internet Cafe. Just 20 years ago, most consumers felt powerless against doctors, lawyers, mechanics and sales professionals who could speak over their heads to confuse or exploit them. Today, consumers educate themselves efficiently about nearly any subject before contracting for services or goods.

Just 20 years ago, the average citizen’s need for income meant a traditional job in a conventional work setting. Today, millions of Americans make money by selling goods, services, information or ideas over the Internet from their home computers.

Which brings us back to this new tax. All early indications tell us it’s not going to work.

(Please vote in poll to the right, in red type. Must vote to see results. Thanks!)

Just after the law took effect, Amazon.com — possibly the country’s largest Internet retailer — shut off links to all of its affiliates in Colorado. Some affiliates are stay-at-home parents, the disabled and the elderly who have set up home businesses in order to generate income while routing around traditional work arrangements. Affiliates promote products for companies, such as Amazon, by marketing and linking to them in return for commissions earned for each sale they generate.

But Amazon — which isn’t located here and barely uses Colorado’s roads, bridges and schools — doesn’t want to calculate and report private exchanges to Colorado revenuers. Neither does retailer Hammacher Schlemmer & Co., which also cut off Colorado affiliates. Expect other online retailers to follow the lead of Amazon and avoid doing business in Colorado. Because the Internet connects them with customers all over the world, they don’t need Colorado and have the option to route around it.

If companies continue disconnecting from Colorado, this latest tax-the-Internet effort will have negligible benefit and could do considerable harm. It stands to generate little in revenue. Meanwhile, it destroys the livelihoods of Internet entrepreneurs — Coloradans who pay taxes and feed children — and limits the options of consumers.

The de facto tax-free status Internet merchants and their customers enjoy isn’t fair. It puts traditional storefront retailers at a disadvantage. Sell a gadget from a store on Tejon, and the price includes taxes. Sell it on the Internet, and the price includes no tax. But maybe we can’t fix it.

For better or worse, the Legislature may have to rescind this law as just another futile attempt to tax what can’t be taxed. If so, this will show us once again how the Internet interprets taxes as damage, and routes around them. — Wayne Laugesen, editorial page editor, for the editorial board

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