State Taxation Should Not Expand To The Internet‏

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You may have seen a recent commercial featuring the Google Chrome web browser. The commercial shows a progression of steps demonstrating how a small bakery has leveraged its web presence to obtain a large number of online orders.

This is a perfect example of why the Internet is a great equalizer. It provides the small retailer with the ability to sell a specialized product that the big retailers cannot specialize in, at least not to the extent that they secure priority placement on search engines.

In fact, with the dramatic increase of web usage in the past few years, real estate on the web and the first page of Google search results can be much more valuable than a physical store location.

As the Representative for several small rural communities, I have a tremendous respect for small retailers. I have watched over the years as these small business have invested in the local economy even though they face an uphill battle. It isn’t easy to invest hard earned money into a business with no guarantee of success. They are subject to the whims of interference and over regulation from state and local governments, being under cut in price by big retailers, and other economic factors such as increased energy bills or rent increases.

Keeping this in mind, I have not been one of those who held it against big retailers for responding to the needs of consumers and driving down prices. As a consumer and advocate of the free market, I greatly appreciate lower prices.

I have noticed what I believe to be a possible reversal of the trend of big retailers putting small retailers out of business. The Internet has made it possible for a small retailer to leverage the power of the web to target a niche audience that the big retailer my miss. The small retailer uses this audience to generate supplemental income that can make the difference between a profit margin and bankruptcy.

This profitability has been helped by the fact that these business do not charge state and local sales tax to their customer base. Nor should they. Those who order through the Internet do not substantially tax the services of the local government. They don’t need police or fire protection, they don’t use the educational system and they don’t substantially require state services.

There is a growing movement to change this that I believe is aggressively advocated for by local governments and big retailers. They want to require small web retailers to charge their customers a local sales tax rate even though their customers are not using the services of the local government and even though nothing prevents the big retailers from offering the same service on the Internet.

The scope and latitude offered by the web is giving the small retailer a new way to complete. The profits earned by the web retailer can subsidize the losses from their main street store location, thus allowing them to keep a physical presence in rural communities and keep small town Main Streets alive. Even though the effort may be well meaning, policy makers should resist the temptation to expand government taxation to the Internet.

I suspect few of those in local government realize the detrimental impact that their efforts will have on the small business people who are trying to bring jobs to their community, although I certainly suspect the large retailers know exactly what this will do to the small business person. As soon as this year, I expect their lobbyists to work hard to pass this new form of taxation. I will firmly oppose this effort.

State Representative Jason Murphey
2300 North Lincoln Blvd
Oklahoma City, OK 73105
1(405) 557-7350 (Office)


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