Should Congress force out-of-state retailers to collect sales taxes in states where they don’t have a physical presence?

As deputy editor David Katz writes in the introduction to this edition of Square-Off, “While online consumers have always been required to pay taxes to their states on online purchases, it’s a requirement that’s mostly been honored in its breach.”

There certainly seems to be good reason to require ecommerce vendors to collect sales taxes online. As Thomas Secor of the Durable Corp. writes, “The idea that a physical presence is a determining factor in sales transactions today is unrealistic and unfair. If a company produces a website offering products for sale on the internet, what difference is there between it and the local store, which many times offers free — and possibly next day! — delivery?”

Of course, no one wants to force the global online sales locomotive to slam on the brakes. Such sales taxes could pose a potentially huge administrative workload for online retailers. They would have to comply with the rules of many of the nation’s nearly 10,000 sales tax jurisdictions.

The critical question, as Arthur Rosen of McDermott Will & Emery writes, may be this: “How much of a burden is appropriate for a government to impose on sellers who operate outside that government’s borders but that are sending goods (physical or digital) or providing service to residents within those borders?”

What do you think? Should online retailers be required to collect state sales taxes everywhere? Please use the comments section below to share your thoughts. CFO will publish the best comments in a future story.

3 responses to “Sales Taxes for Online Retailers: Tell Us What You Think”

  1. It is only fair that retailers who capitalize on the infrastructure (roads, airports, etc) collect taxes for the states that through the grace of their citizens pay for the infrastructure.

  2. A B&M has one store, one tax rate, one authority that would conduct an audit, and one tax form to fill out. Online would be required to define thousands of tax rates, be subject to audits from 50 or more States, and file monthly returns to 50 or more States ( even if the amount due is $0). While lawmakers claim ‘free’ software, there are costs to update/install, and the different programs lack a common database, making tax collection for those that sell multi-platform a nightmare.

    Lawmakers claim more then $23B goes uncollected, but the facts they used is based on false data. Fact is, 83% ( some estimates are 90%) of all online collects Sales Tax now. Amazon, with warehouses in 27 States, collects Sales Tax on more than 70% of all it’s purchases now. That shrinks that $23B number to less than $2B. Clearly, the cost to collect this ‘spare change’ from phone booths will be more than the tax collected.

  3. Charging sales tax for online purchases is just a cash grab for the states. It is very disingenuous when politicians say that the playing field needs to be levelled for local mom and pop stores. There are no local mom and pop stores. The big chains forced them out of business 10 years ago. If the states do succeed in getting legislation passed to start charging sales tax on online purchases, they will just waste the extra money and grow the size of the government. Let the free market take care of it. If local stores truly want to compete, they need to provide great customer service and stock the products that people want to buy. As for the argument that sales tax should be charged to online retailers to pay for the repair and maintenance of roads, that is why we and the delivery companies already pay so much in taxes on fuel. If a sales tax for online purchases gets passed into law, the only real winners will be the big chain stores and state government. This will not benefit the consumer at all.

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