It is not accurate to equate online sales tax collection with sales tax collection by brick & mortar stores. While the physical store only needs to collect sales tax for its own tax jurisdiction, an online retailer is being asked to administer a tax collection regime for thousands of jurisdictions, as an online purchaser could potentially be in any one of them. This huge compliance burden is the reason that a robust small business exemption is needed.
The point made by Mr. Henchman regarding the ever-changing nature of state and local tax laws is also an important one. Not only are state and local tax jurisdictions a many-headed Hydra (thousands of heads in fact), even the number and nature of the heads is unstable.
While it is understandable for state governments to seek additional sources of revenue in these economic times, responsible policymaking requires weighing the long-term economic consequences of HOW that revenue is raised. Targeting an innovative sector like electronic commerce because of its productivity is as short-sighted and unsustainable as a plague of locusts devouring a fertile field and moving on to the next. Not only have they failed to achieve meaningful simplification of sales tax regimes, they are now seeking to dump the task of dealing with that failure on small online businesses and pocket the revenue. We hope that Congress recognizes the need to promote new innovative business models like e-commerce rather than penalizing and taking advantage of their creativity.