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The real world needs ‘Net’ taxes
By LEE GOMES
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Do you think that billionaire Internet moguls should continue to benefit from a tax loophole that hurts parks and schools, and makes it harder for your neighborhood bookstore to keep open for business?
I didn’t think you did.
In that case, cheer on New York and Texas as they chip away at the popular but grossly unfair advantage enjoyed by the Amazon.coms of the world. Online retailers don’t have to collect sales tax on the items they sell if they’re “out of state” companies.
Now, chances are you’ve ordered a tax-free book or two from Amazon, and enjoyed the experience. No one likes paying taxes. But this particular tax break is an especially pernicious one.
For starters, by giving online businesses a permanent advantage over their bricks-and-mortar competitors, it helps those who need it least — huge, profitable e-commerce companies — at the expense of often-struggling local retailers.
In addition, the tax policy is regressive. It disproportionately benefits the upscale citizens most likely to shop online. Worst of all, as commerce increasingly moves online, state and local governments are being deprived of the sales-tax revenues they rely on to run schools, build roads, pay police and firefighters, and do all the other things they’re supposed to do.
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Internet sales are not tax free, nor are mail order sales. It is the consumer’s responsibility to pay their state’s sales tax for online purchases. It’s called an Use Tax. That the consumers are not complying with their state’s tax regulations is not the online retailer’s fault.
As a small niche online retailer (and more like a thousandaire than a billionaire) myself, I’m not about to play the roll of tax collector for the 44 states that have a sales tax. (I relocated to Redding to Portland a few years back) My customers who choose to run their order over the phone often ask about sales taxes, and I tell them it’s their responsibility in their state.
If the state is losing sales tax revenue, it might want to re-think it’s tax structure or beef up it’s methods of collecting Use Taxes from it’s scofflaw residents. If a state in which I am not a resident wants me to collect taxes on it’s behalf, they better be paying me a sweet collector’s fee.
Still, NY law doesn’t so much hurt Amazon as it does by attacking independent third parties who make commissions off of Amazon. Which in the long run, means NY is attacking it’s own citizens.
Interesting, Reddingblog, thanks for sharing your perspective. I think you’re right about the responsibilities of the buyer to pay use tax, but compliance is an issue with use tax; even among businesses buyers, there is a substantial non-compliance rate.
When the situation is reversed, and you’re trying to sell to someone from California, don’t you feel that you’re at an unfair disadvantage having to add sales tax to your price when your out-of-state competitors don’t?
Hi Jim, delayed response on my end, actually had a moderately busy morning. It’s a nice reprieve from stagnant sales.
I don’t think it’s unfair disadvantage at all. If the California market was large enough and I felt that the sales tax to CA customers was negatively impacting my bottom line, I’d move to a state that didn’t have sales tax, then keep selling to Californians.
Selling online is not always about the cheapest deals and the ever-competitive electronics niche. Local specialty brick and mortar stores could do quite well selling their products online. There is almost zero financial barrier to entry, it’s more of a time investment than anything else.