Another thing that puts a damper on them is taxes.
Let's say my site lets people purchase news articles for 1 cent. I get 4 readers in Chicago who each purchase 1 article per week. That's 208 transactions for a total of $2.08.
That's over the threshold in Chicago's state, Illinois, for creating an "economic nexus". Their threshold is $100k sales per year or 200 transactions per year. So now I've got to register with Illinois and do regular tax filing. I may also have to collect more data than I want on my readers there, such as address information, to figure out the right rate (rates vary by location within most states).
23 other states also have that annoying "or 200 transactions" condition on their economic nexus laws.
Compare this to if I instead only offer my news articles through an aggregator. Now when those 4 readers in Chicago buy my articles they are doing business with the aggregator. I don't have to deal with any Illinois taxes. Or any of those other 23 states' taxes.
That's the aggregator's problem. That's fine because the aggregator presumably has not just my 4 readers in Illinois but also plenty of readers of the other content they aggregate, making their business in the state large enough that the costs of dealing with taxes are comparatively small.
The US really needs to setup nationwide tax infrastructure such that commerce is not stymied by the compliance burdens, or legal risks of making a mistake.
As a seller, there should be a government website with an API that I can hook into where it calculates all applicable taxes and does all that nonsense and all I need to worry about is providing the product or service.
Presumably even if such a system existed (there are private systems like Sabrix that do the hard parts of this), you’d need to give the system information that you might not currently have for a web visitor (like the physical address of the visitor).
Sure, but the government can make it so the seller does not see that information. Or the government can make it so taxes are not based on your address.
I'm not sure I see a practical path to the latter, at least at the granularity of "what state are you in?" and in the context of "at least one state wants to tax such transactions".
It would probably be within the Federal government's power to prohibit states from requiring online/mail-order/phone sellers from outside the state to collect the state's sales or use tax unless that state participates in some specified system to simplify that.
Such simplification might include a single rate per state and a way to do a single filing that covers all states one sold items into.
I.e., something similar to how the EU handles VAT. Here's how we as a US company handle VAT in EU countries. First, we registered with the tax authorities in a single EU country. We are using Ireland. This took something like 20 minutes to figure out and was all online.
Then, once a quarter we upload a file to the that country's tax office that simply lists for each EU country how much we sold, what VAT rate we used, and how much VAT we collected, and we give Ireland all the collected VAT. This only takes a few minutes I believe.
Ireland then deals with sending each of the other EU countries their share of the VAT we collected.
There is an ongoing effort to do something like that in the US with the Streamlined Sales Tax (SST) project. Almost half the states have joined that. The deal there is that if a seller agrees to collect tax for all the SST states then those states will pay the costs for the merchant to use some third party tax service, such as Avalara, for this.
That's nice, but does not include any rate simplification. With simple rates, like in the EU, I don't need to hook my cart up to any external tax APIs. I just need an internal table of the per country rate. I use an external API to keep up to date when a country changes their rate (which isn't very often), but that can be a daily cron job rather than something in the live cart path. With the bazillion rates per state model of the US you have to hook your cart up to a third party tax API.
SST also doesn't help with the states that aren't part of SST. Of course the third party tax services such as Avalara are happy to handle those for you too, but not for free like they do with the SST states.
An EU style system with both simple rates and a being able to deal with all states through one free service is probably too much to hope for. But maybe Congress requiring states to join SST if they want to force out of state sellers to collect would be achievable, and that would be way better than the current mess.
Let's say my site lets people purchase news articles for 1 cent. I get 4 readers in Chicago who each purchase 1 article per week. That's 208 transactions for a total of $2.08.
That's over the threshold in Chicago's state, Illinois, for creating an "economic nexus". Their threshold is $100k sales per year or 200 transactions per year. So now I've got to register with Illinois and do regular tax filing. I may also have to collect more data than I want on my readers there, such as address information, to figure out the right rate (rates vary by location within most states).
23 other states also have that annoying "or 200 transactions" condition on their economic nexus laws.
Compare this to if I instead only offer my news articles through an aggregator. Now when those 4 readers in Chicago buy my articles they are doing business with the aggregator. I don't have to deal with any Illinois taxes. Or any of those other 23 states' taxes.
That's the aggregator's problem. That's fine because the aggregator presumably has not just my 4 readers in Illinois but also plenty of readers of the other content they aggregate, making their business in the state large enough that the costs of dealing with taxes are comparatively small.