Archive for Monday, April 29, 2013

Editorial: Tax fairness

Charging local sales tax on Internet purchases is only fair.

April 29, 2013


Local retailers – the lifeblood of local communities – may be on their way to getting a deserved break from the federal government.

The U.S. Senate advanced legislation last week that would impose local sales taxes on purchases made over the Internet. A final Senate vote on the measure is scheduled for May 6. If approved by the Senate and the U.S. House and signed into law, the action would put local retailers on an equal footing with giant Internet retailers who have no “brick-and-mortar” presence in the communities where their customers live.

Under current law, states can only require online retailers to collect sales taxes if the merchant has a physical facility, such as a store or warehouse, in the state. So Kansans, for example, pay sales taxes on their Amazon purchases because the retailer has a huge warehouse in Coffeyville, but residents of other states may not. Many online sales are tax-free, to the dismay of competing merchants who maintain physical stores, and have all the expenses that go with them, including charging and collecting sales taxes! The same dismay has been expressed by governors, both Republican and Democrat, who have pressed their case to Congress for years, trying to get authority to collect sales tax on online purchases.

Proponents of the legislation say it’s a matter of fairness. Plus, the revenue lost to local and state governments is significant. The Commerce Department estimates that Internet sales in the country totaled $226 billion last year, costing states an estimated $23 billion because they didn’t get any sales tax from those transactions. Supporters also argue that the measure simply gives states a way to enforce current laws and collect taxes they should be getting in the first place.

Those who oppose the bill (and they include Grover Norquist, the tax foe of all tax foes; the conservative Heritage Foundation; and politicians from states that have no sales tax) argue that it’s a tax increase that will hurt the economy and place more regulations on small retailers who are trying to gain sales via the Internet.

The measure still faces an iffy outcome in the House of Representatives, where the anti-tax cadre holds more sway.

This is a change whose time has come. Congress needs to get this monkey off the backs of struggling local retailers and do away with an unnecessary advantage that fosters e-commerce to the detriment of businesses that invest in local communities across the nation.


none2 11 months, 2 weeks ago

This move is nuts. I do think that there should be some standardization of what constitutes "shipping and handling" as a lot of it is very vague with purchases done online or over the phone. That aside if there is a sales tax it should go to the location of the store. To expect an online retailer to keep track of thousands of sales tax rates (at the state, county, city, etc level) is crazy, and it is a piss poor excuse to say that the million dollar exemption will take care of all the small sellers. There is nothing written in stone that will keep it at that level.

Seriously, when someone drives to another state -- such as Missouri, Oklahoma, Nebraska, or Colorado, do you seriously keep track of the sales tax you paid there and how much you should also pay to Kansas? If an online store is based in Smallville, Delaware, that is where any sales tax should go. As for overseas shopping, I've only bought pet medicines from Australia or New Zealand. Quite frankly, I'm not sure I'll continue to do so. Though the companies are reliable, the exchange fees that the credit card charges is so unpredictable. The overseas seller gives the amount in US dollars, but the cards still charge hidden fees.

Any Kansas retailer who thinks they are missing out to online sales, should simply make sure that they themselves have an online presence. If 100 or so years ago, a store was disadvantaged to another store because the new store had a rotary phone, and the old store didn't, you would expect the old store to get a phone. So instead of moving us back 20 years, brick & motar stores need to adapt and sell online too.


mags_and_k 11 months, 2 weeks ago

I am a dedicated online shopper. I can't recall a time I DIDN'T pay sales tax and shipping if the purchase doesn't qualify for free shipping. (Which is rare because there are ALWAYS ways to void shipping costs.)

"Much Ado About Nothing"........time, research and cost of such once again wasted!


Gareth 11 months, 3 weeks ago

As somebody who runs an online business, this will be a huge burden for small businesses, who will now have to track hundreds of different sales tax rates across the country and reconcile with each and every municipality -- and unlike large corporations, we don't have a staff of tax accountants to do that for us.

This is yet another one of those "Brilliant" ideas put forth by people who have ZERO understanding of the complexity of the issue. The last thing we need are technological amateurs like our legislative idiots trying to pass laws governing the internet, which they don't understand and are too ignorant to educate themselves on.


fan4kufootball 11 months, 3 weeks ago

Oh My - look at how many companies will have to file sales tax returns in all 50 states. This will cost business a lot of money in software, etc and guess who gets to pay for it - the consumer!


autie 11 months, 3 weeks ago

I shop online mainly for the excitment of getting a package in the mail. The neighbors will gather about and talk about what the fed ex man brought this time. New boots, bullets, maybe a vaccum sweeper. The best is the lobsters....shipping is outrageous but they are so much fun to cook alive and then eat them.


Currahee 11 months, 3 weeks ago

The sales tax debate is funny because more often than not, you will pay shipping charges on items which can end up costing the consumer more than the sales tax. So honestly it can go both ways. I shop on amazon mainly because they will have something that wont be here for sale. And tax doesn't even matter for cost savings because amazon has a facility here. Online retailers have a major price advantage for not needing to hire sales staff. Should we add an internet markup to 'even up the odds' too?


Centerville 11 months, 3 weeks ago

Has anyone explained to the small stores that they, too, will soon have to collect taxes based on a customer's residence? Nah. And, the sane response is to eliminate sales taxes altogether.


toe 11 months, 3 weeks ago

This is really the first step in a national sales tax. This tax will be desperately needed for Obama Care to survive. The reason that congress is acting now, and at light speed, is to sneak in the foundation for the national tax before the failure of Obama Care comes to light in January. The cost will crush our nation and the subsidies promised with crush the budget. Imagine that, Congress being sneaky.


tomatogrower 11 months, 3 weeks ago

I alway feel bad when we buy something we can't find in Lawrence at Nebraska Furniture Mart, since I like my money going locally. But did you know that if you special order something there and they send it to your house, you pay Lawrence sales tax, instead of the high Legends sales tax?


fu7il3 11 months, 3 weeks ago

I love how these things always make it seem like internet businesses are nameless, faceless entities. Online businesses invest in their local communities just as much as physical businesses. Most major retailers online already collect sales tax. What this is going to hurt is small internet businesses, most likely those with one of two employees, who can't afford a physical location in the first place. They are going to have to deal with sales tax laws and filing in every place they sell anything. Can you imagine how complicated that is going to be? Tax attorneys will be the only one coming out ahead on this one. There will be no advantage to physical businesses or internet businesses. The consumer loses. It's a bad deal.


jafs 11 months, 3 weeks ago

Local businesses...deserve the advantage.

I can't agree with that. Though I try to shop locally, I've had many poor experiences with local businesses. If they want me to patronize their business, they need to provide quality goods/services at reasonable prices.

Last time I ordered something online, I paid a lot more in shipping costs than I would have in sales taxes, so there's no built in advantage for that business, and what I wanted wasn't available locally (it could have been, but the distributor for this area chose not to carry it).

The whole idea of sales taxes is that they're charged on purchases in a given area - it makes no sense to charge them for purchases made elsewhere.


skinny 11 months, 3 weeks ago

If this passes all the companies have to do is move outside the United States and again, they will not have to collect sales tax. Pretty simple. That is why I shop online. When I buy big ticket items I save big bucks!

We've run off all the big clothing and electronic factories from the United States, might as well run everything else outside the united states. At least we won't have to pay sales taxes!


usesomesense 11 months, 3 weeks ago

It's completely ridiculous that something hasn't been in place that actually works for over a decade - more like the last two decades. Unfortunately our state government jumped on the bandwagon with the 'Streamlined Sales Tax' program which complicated sales taxes immensely for small business that either deliver goods or provide on site services in an effort to uniformly tax. For larger cities that meant losing some sales tax revenue where goods and services were provided to smaller towns surrounding them. The state of Kansas does require 'Use' tax (although most people don't know it exists) which is intended to tax out of state purchases that are delivered in state. I'm really not sure what's so difficult here - assign a percentage and if is delivered to another state (or from another country) to the end consumer it should be taxed and the retailer keeps track of the destination state (or locality like local retailers). Local businesses carry a lot more overhead and pay a lot more in taxes (property and income) and deserve the advantage. Online retailers have the advantage of buying in larger quantities and lower overhead, and broader selection. This merely closes the gap a very small amount.
It's really quite simple - my business pays taxes, I pay taxes, my employees pay taxes and we all enjoy the benefits (at least at the present moment) of public education for our kids, roads to drive on, sewer and sanitation services, recreation facilities etc - and we're all helping pay for that. Online retailers may pay NONE of that. As far as it hurting small online businesses starting up - it's much like a guy that starts up a business and says 'If you pay me in cash I won't charge you sales tax' - and I'd expect even if there's a law in place mandating it there still won't be anywhere near the correct amount collected - or at least distributed back to the states accurately.


jafs 11 months, 3 weeks ago

This seems odd to me.

If I order something from another state by calling an actual business there, I don't pay local sales tax on it, right?

Generally speaking, I pay shipping, but no sales tax, and if I did pay any sales tax, I'd expect to pay the sales tax rate of the area in which that business is located, not the Lawrence KS rate.

So, if we're going to pay sales tax on online purchases, it would make more sense to pay sales tax rates where the business is located, and have that money go to that local area, not here.

Also, this opens up the argument that it puts an unfair burden on online purchases, since customers will have to pay taxes plus shipping costs, making it much harder for online commerce to succeed.

Given that we generally pay shipping, I'd say it's a somewhat even playing field now.


Lawrence Morgan 11 months, 3 weeks ago

As I commented earlier, this editorial is well-presented and factually correct.

You might also want to read the NY Times article on this subject, which just came out:


Lawrence Morgan 11 months, 3 weeks ago

This editorial, again, is right on!


Steve Jacob 11 months, 3 weeks ago

I love how people make up numbers. If it's not ebay, your most likely paying sales tax already on about everything you buy online.

I think what hurts small business the most is selection. Stores have less and less inventory, while the internet has everything.


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