QUESTION: Mr. Armstrong; The taxation of the internet seems to be rising. At the same time it appears as though this could really harm the economy by reducing competitiveness of small companies trying to comply with collecting taxes of so many different states. Have you looked at this as a possible factor in creating the next economic depression?
ANSWER: Absolutely. There is a tremendous clash of jurisdictions and governments are fighting for more taxes to pay government pensions. It has turned into them against us, and he who makes the rules typically wins until he provokes a revolution. Most revolutions are ALWAYS over taxes, such as the American and French Revolutions.
The Supreme Court ruled in Quill Corporation v. North Dakota 504 U.S. 298 (1992) that there was nothing inherently unconstitutional about collecting state and local sales taxes from out of state retailers’ online orders to in-state residents. The only question was whether imposing such a requirement would cross the line from an acceptable burden on interstate commerce to an unreasonable one. The court claimed that technology had greatly eased the burden of collecting taxes for multiple jurisdictions. However, the court concluded that Congress should make the call.
The ruling demonstrates how courts cannot be trusted to defend our liberty when those judging are appointed by the political machine. What if every state applied taxation based upon the same methodology that the Feds do? Let’s say you were born in New York but moved to San Francisco. New York could then claim that since you were merely born there, even if you don’t use any services there, you owe taxation to the state of New York on your income. California could then impose an income tax on the theory that you are a resident using services. Now you owe income taxes to two states plus the Feds. This would destroy the freedom of movement rapidly. Those who leave the United States suffer the same fate and owe taxes to the USA for the simple reason of their birth.
If Congress enacted such a law to declare everyone on the internet as tax collectors for every possible taxing authority, the economy would collapse. Then cities could demand the same thing, so places like Philadelphia or New York City that impose additional sales taxes of some kind would jump on the wagon and everything would collapse.
Now you can see how revolutions are born. Those in power always want more without regard for the consequences. This is why I have argued we MUST eliminate income taxes at the federal level and states must be restricted to their territory. No state has the right to impose any duty upon a non-resident of their jurisdiction — PERIOD. Forcing businesses to collect taxes for every state would destroy small businesses, and it compels them to be quasi-government employees, without any compensation, who face criminal penalties for failure to comply.