One of the complaints that fueled the American revolution was that the colonialists were enduring ‘taxation without representation.’ The British king was levying taxes on people who were subject to the king, but did not have the same rights to advocate for themselves that others who were subject to the king had.
Let us propose a scenario: I, an author and a publisher, sell a digital download to someone living in, say, France. Should I be collecting tax on that sale and sending the tax to France? Since I am not a citizen of France, there is no sense in which I could represent myself or advocate for my concerns about this tax. Now let us suppose I should be collecting the taxes on sales for every country. Now the problem is compounded radically. This would be ‘taxation without representation’ pushed to its limits.
Add to this the reality that as a (very) small businessman, there is no way I can keep track of the different laws in all the jurisdictions of the globe. If there was a way for the thousands of jurisdictions to enforce their laws on me (eg, each had their own battalion of ‘red coats’ circulating around the village), I simply could not do business.
Now, I ask you, how is the recent Supreme Court ruling much different than the scenario I have laid out above?
I live in Wisconsin. If California decides to have state sales tax laws that are onerous, precisely what avenue do I have to petition the state of California about my grievance? And lets not forget the other forty-eight states!
In the minds of some, if SCOTUS rules something is constitutional, then by God, it is constitutional. Since SCOTUS has ruled in favor of South Dakota, that means the definitive word has been spoken on the Constitution. I say that SCOTUS has rendered a decision that is fundamentally at odds with the very soul of the Constitution. It has effectively repudiated one of the core principles of the American revolution: ‘no taxation without representation.’
The US has already gone leaps and bounds away from the Constitution, stretching back to well before I was born. I can do nothing about that, and I can do nothing about South Dakota vs. Wayfair. I was already at the mercy of 49 other states, without meaningful representation, on a myriad of other matters, and this just adds to them.
However, as I sit here and ponder the implications to my operations, there is still one decision I can make: will I remain in business at all?
I remember a few years ago I did a conference in the state of Ohio. Ohio requires exhibitors to collect sales tax. The hassle involved in complying with Ohio’s laws for just one weekend’s event convinced me that I would never do business in Ohio again. And I haven’t.
People who don’t own businesses fail to understand the practical impact of regulations, and can be frequently found proposing even more regulations, and then pooh-poohing the businesses for chafing at the regulations that already exist. Its a different story when you’re the one who is seeking to comply with the law and its your neck on the line if you mess up.
For the Ohio thing, I had to first of all, FIND OUT what the law was, then MAKE AN ACCOUNT, which required PAPERWORK, then I had to determine WHICH COUNTY I would specifically be doing business in, because each COUNTY and EACH MUNICIPALITY was potentially DIFFERENT. Then I had to calculate the appropriate tax, which requires RECORD KEEPING, and then MAKE THE PAYMENT. Then I had to cross my fingers and hope that I did everything right.
Its a pain in the butt just to make sure I am good to go in Wisconsin. To put myself through that process for just 3 days in Ohio was just not worth it.
Now imagine that I would have to do this for all 49 states!
It isn’t enough to say, “Oh, well, this state exempts you, or that state makes it easy!” The point is you have to KEEP UP with the laws of ALL FIFTY STATES and potentially face PENALTIES if you fail. People forget that one of the big differences between the government and a corporation or individual is that the government has COERCIVE authorities. A corporation can sue you and take you for all you have. A government can throw you in prison. Rare? Perhaps, but like I said, if its not YOUR NECK on the line, its easy to forget. What do YOU care if I get audited, right?
To give you just a small taste, take a look at this link, which has very helpfully created FIFTY links for you to click on. If you were a small business, just think about the fifty different accounts you would have to set up, with fifty different usernames and fifty different passwords (for your own safety!) and navigate through fifty different sets of regulations and laws, and write checks to fifty different states, remitting according to fifty different schedules.
And in only one of those fifty states could you ring up your representative and say, “Holy smokes, man. I can’t keep up with this stuff and stay in business!”
Ironically, the people who most despise the rich and big businesses and advocate for more regulations fail to understand that the rich and big businesses are far more able to work through regulations. Your rich fat cat can afford to pay top dollar for smart accountants and lawyers… your average small businessman can’t. So, for all the talk about people hating on big corporations like Amazon or Walmart, etc, the ones who will suffer are the very people the bleeding hearts say they want to help. (Quick side note to the bleeding hearts: please stop trying to help. I beg you. You’re killing us.)
In other words, in S.D. vs. Wayfair, Amazon and Walmart (and Wayfair) are not subject to ‘taxation without representation.’ They can afford to put lobbyists in every state house and they can field an army of lobbyists in D.C..
Wayfair is going to perpetuate a trend towards consolidation into larger and bigger businesses, with small businesses getting squeezed out.
I mention all of this because the idea of ‘taxation without representation’ is not an esoteric platonic principle. It is tied intimately with the idea of liberty, because (this will be new to many readers, I fear), economic liberty and personal liberty are themselves intimately joined. You cannot have personal liberty–not really–if you do not have economic liberty. If you do not have the ability to enter and exit commerce as you see fit, then your livelihood, and therefore your life, is subject to the will of others.
Even if you have never considered that idea before, hopefully you can see that meaningful representation is an important mechanism for maintaining liberty. Insofar as S.D. vs Wayfair demolishes representation, it is a body blow to the liberty of small businessmen.
I fear, too, that the response to the mess that Wayfair is making will be resolved by the time honored response (that not coincidentally, also favors the big businesses) of Federalizing the matter in order to ‘simplify’ the laws. In this case, some kind of national sales tax, or Federal department set up to collect the sales tax and disburse it to the various states, is almost a foregone conclusion.
Small businesses, faced with the crush of trying to comply with hundreds, if not thousands of taxing jurisdictions, will welcome such simplification. Of course, when the laws are written, you can be quite sure they will be written to protect the interests of the big businesses, because, after all, only the big businesses can afford to hire full time individuals to advocate for them.
Once Federalized, there will be even less ability to pursue meaningful representation. The regulations will fall into the hands of hundreds of faceless bureaucrats, and if you didn’t like the way the agency was being run, hey, all you have to do is persuade 50 million people or so to elect the president you like and then hope that the president is able to make changes to the agency and its regulations without it turning into a political knife fight.
The result is that it will be taxation with even less representation on state sales tax issues than the virtually nil we have now thanks to Wayfair. Tell me I’m wrong.
I’m not the only person who has noticed the sword of Damocles hanging over the necks of small businesses in the United States. However, its doubtful that the resolution will be a reversal of Wayfair. I see some congressional actions being proposed which appear to be sensitive to the issues, but I’m skeptical.
Still, I’m waiting a bit before taking definitive action. As it stands, the only prudent action–since I’m not a rich fat cat, and I care about my neck–is to simply withdraw from the marketplace, or at least strictly confine my activities to my own state, along with perhaps a small handful of states with easy to understand systems for collecting sales taxes. All the other states will just be out of luck, deprived of my products.
God help us if the rest of America’s small businesses come to the same conclusion.