Sorry to rehash an old blog post, but I thought it was relevant in light of the recent news coming from Amazon and Overstock. The wave of States going after online retailers for Sales Tax collection is becoming a Tsunami. This post was originally written in January of 2009.Brick & Mortar stores have been complaining for years about the competitive advantage online stores and catalog companies have regarding sales tax. To be completely honest, I make most of my online purchases at Amazon because I don't like paying sales tax. I like the current system just the way it is, but it will change and sooner rather than later.
[I now make all of my online purchases at Buy.com and pay sales tax because Buy.com is based in California.]Unfortunately the tide has turned and will soon be gathering steam as State after State follows the model
New York started:"New York state won a round in court against Amazon.com over a new law requiring out-of-state online companies to collect sales tax from shoppers in New York.
The law applies to companies that don't have offices in New York, but have at least one person in the state who works as an online agent -- someone who links to a Web site and receives commissions for related sales."
Of course this is just round one of the court battle and my guess is that Amazon will continue this fight up the Judicial ladder until it is presented to the US Supreme Court, but it is just a matter of time before sales tax is charged on every purchase from Brick and Mortar to online stores.
I'm resigned to the fact that it will happen in the near future, but I'm very concerned with the
implementation. Small business cannot manage collecting a different sales tax for every city they ship to, it would cause an undue burden on all but the largest of companies.
In my years selling online with Glacier Bay, we shipped to every single state in the US and managing the different sales tax
requirements for each local
jurisdiction would have made my low margin business implode.
Just look at the different tax rates for each state.I think there is a simple solution, but as yet I haven't heard any lawmakers presenting it, though I'm sure I'm not the only one to come up with it.
The Internet should be treated as its own locality with a flat sales tax rate of 4 - 5%. All sales on the Internet need to have the same sales tax rate
irregardless of where the customer is located. Payments need to be made to a national
clearinghouse for
distribution to the states.
This of course will only be the first stage of the process because once governments start seeing the cash they will of course want more. In the first iteration though, local governments will not take part in the revenue unless they work out a deal
specifically with their state's tax department.
Let me be clear, I do not want this to happen, but it is inevitable that sales tax collection will come to the Internet and online retailers need to band together now to enact something close to what I've presented (and I'm sure others have as well) while they still have some negotiating leverage.
The key is not to solve the tax problem all in one fell swoop, but to come up with a workable solution that gets state government tax revenue and does not put an undo burden on retailers to collect that tax.
Just my 15%
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