Online sales tax legislation gaining steam …

This article describes recent efforts to impose state sales taxes on online retailers.  As you might imagine, “bricks-and-mortar” retailers are complaining that their having to pay state sales tax, while many online retailers remain effectively exempt, is unfair.  There is also strong opposition to the bill, not least because the complexity of complying with 50 different jurisdictions’ sales tax laws can be confusing and oppressive.

Would it make more sense to have one flat tax paid by online sellers that have no geographic presence?  Are there alternative ways to fairly allocate tax responsibilities between online retailers and those with a physical presence?  Should online retailers not have to pay taxes at all?

4 thoughts on “Online sales tax legislation gaining steam …

  1. I think that in some sense if a company is complaining of an unfair advantage it is because they failed to innovate. It is not so much that the government chose winners and losers but that they did not adapt quickly like the online retailers did. I am thinking of Borders for instance, they did not adapt their model of selling books and the result was that they closed down a lot of their stores. I guess in relation to the issue of online retailers not paying sales tax a flat tax for all retailers would make sense, but I think that it would have to be a small fee because of the disadvantage they face over shipping costs etc..

    • As to the “failing to innovate” point Dan made, I entirely agree. BestBuy and Barnes & Noble have both become Amazon’s showcases, allowing customers to enter and view products and, on the physical store’s Wi-Fi, order the products from online retailers. Innovation is possible, but may be difficult in a world where Amazon is striving for same day delivery.
      As to the idea of a fair tax for retailers or a sales tax, the final determination should probably be on what creates incentives for more commerce. If the premise that sales tax is legitimate on physical stores is granted, all reasoning there should point to some kind of sales tax on digital stores. The issue then becomes whether it should be on the location of the store or the consumer or some third arbitrary rate. If it is the sales tax of the consumer, there would probably be little movement of people to try to lower the sales tax burden of solely Internet goods, so that keeps things simple. If it were the sales tax burden of the manufacturing state, then most Internet business would move to the states with lowest sales taxes. These states would benefit from the influx of jobs and money moving, including from sales to customers outside their borders. While this seems unfair, many states thrive on the sales and hotel taxes of tourists, which generally come from out of state as well. I would be in favor of putting the sales tax of the originating state on the Internet company to allow for more experimentation between the states to see what would work best.

  2. Most websites don’t charge sales tax. Under most state laws you still owe the tax, but unlike the purchases you make in a store, the business selling you these goods online doesn’t have to collect the tax from you. Instead, when you complete your state taxes, you are expected to self-report and pay what you owe for purchases over the past year. This disparity needs to end. It’s time for a conclusive and nationwide approach to collecting sales tax for goods purchased over the Internet. I view the Marketplace Fairness Act as an issue of compliance, fairness and revenue balance for our communities in a new retailing environment. We cannot continue to support an environment where legally required taxes are collected, tracked and remitted by some, while other businesses get a pass. Retailers fight for market share everyday, but they shouldn’t be forced to compete on the collection of sales tax.

    Local, regional and state governments will receive additional revenue as a result of this legislation. Sales tax receipts are widely accepted as a form of local, regional and state tax structures. These receipts enable our local communities to provide for various items critical to a healthy business environment: maintained roads and highways, improved public infrastructure and public safety functions, just to name a few.

    These services controlled and appropriated at the local level cost money, and when revenue due is not collected, government must turn to other sources to make up for the shortfall. The federal government must stop exempting some businesses, particularly online-only businesses, from collecting and contributing to our local communities’ tax structure. The status quo simply shifts the burden to other taxpayers, consumers and businesses.

  3. I can see why there is a desire for a flat tax, but when it comes time to collect taxes who should get this flat tax from online companies such as Amazon? Only the state where they are incorporated? or where their headquarters are? or where the specific goods are being shipped from? I understand that Indiana has roads to pave, but I do not think on a basis of fairness they should get the sales tax from an online purchase from a company outside of Indiana which is shipped from a location outside of Indiana. I know this is a simplistic view, but I am just thinking about the issue of fairness.