Internet Sales Tax Debate: Where do you Stand?
There has been a lot of press lately about increasing interests from states to start requiring internet retailers to start collecting sales tax for purchases made by customers located in their state in an effort to help close state budget gap shortfalls.
The most publicized case has been the state of California, who expects to bring in an additional $317 million a year from internet purchase taxes.
California is actually the seventh state to try to get around a 1992 US Supreme Court ruling holding that sellers can’t be forced to collect sales taxes unless they have a physical presence in the state – with affiliate advertisers or brick/mortars being considered “physical presence”. So what has Amazon, Overstock, and other large internet retailers done to avoid collecting taxes? By cutting off relationships with all of their affiliate advertisers in those states (so they no longer have a “physical presence”).
As always, there’s two sides to every story.
Those in Favor of an Internet Sales Tax:
Those in favor of an internet sales tax in California and elsewhere argue that:
- taxing internet sales levels the playing field with brick and mortar retailers and removes an unfair competitive advantage
- it’s a good way to raise tax revenue in difficult financial times, especially when it is already required
- brick/mortar retailers in states have suffered, which has led to a loss of sales tax revenue
Those Opposed to an Internet Sales Tax:
- Amazon and other large internet retailers are strongly opposed. It would cut into their margins and possibly lower sales volume while not giving much benefits to the states
- Internet retailers argue that this legislation is pushed by brick/mortar retailers like WalMart and BestBuy
- Claim that it’s an added tax on consumers in a time when they don’t need it
As much as I personally don’t want to pay additional taxes, I think the ‘con’ side arguments are fairly weak in comparison – and I don’t like Amazon’s strategy of throwing it’s affiliates under the bus to keep avoiding consumer taxes on purchases. Many will be forced to close their business or move to another state (and eventually there’s only so many states they can move to).
Those are my thoughts – and I want to get yours too.
What’s your Take on the Internet Sales Tax?
Nobody wants to pay additional taxes – I think that’s well established. But, the real question here is more about principal than personal interests.
The two questions I have for you are:
1. Should internet retailers be able continue to not have to collect & remit state sales tax?
2. If all internet retailers were taxed would you buy less stuff online?
(take the polls and share your feedback in the comments)