Jensen: Tax online sales, but convenience matters
October 18, 2011
To date this year, Amazon’s sales have soared to $9.91 billion. A Forester Research report stated that by 2014 the amount of online retail sales will be $250 billion, which will make up 9 percent of the overall retail sales in the U.S.
We can thank retailers for the sales tax they collect that provide many of the things we take for granted like newly paved highways.
The problem is the online impact not collecting sales tax.
Online sales are on the rise and I only see this increasing at a faster rate due to devices like the iPad, iPhone, Amazon Fire and other mobile devices that allow for convenient purchases.
I remember listening to the news a few years back on the subject of holiday shopping being consumed more online than in big shopping centers. Malls are struggling. Local businesses are struggling. They struggle just like many other brick-and-mortar retailers that have raised their prices or markup just to make the same as an online retailer that gets away with not having to collect sales tax.
It was in 1992, in the case of Quill v. North Dakota, that a U.S. Supreme Court “ruled that retailers are exempt from collecting sales taxes in states where they have no physical presence, such as a store, office or warehouse.”
Additionally, “the Court specifically noted that Congress has the authority to change this policy and could enact legislation requiring all retailers to collect sales taxes without running afoul of the Constitution.”
Since then, two strategies have been discussed: The Main Street Fairness Act and Clarifying Nexus. The first one looks at stating that there is no burden for these online retailers to collect sales tax due to the advancements in technology. The second looks at just redefining what “nexus” means, a definition used in the 1992 decision. And currently several states that I will also mention later have started to say to online retailers that have affiliates in certain states count for that nexus that would require them to collect taxes.
Let’s face it. When given the option to buy something we don’t really have to go and see for our own eyes, it is much easier — nine times out of 10 — to make that purchase online with a service like Amazon. At the same time though, we don’t want empty buildings amongst our many local squares or streets, right?
The convenience was always for local businesses before big-box retail and then the online world. People didn’t mind walking a few blocks to get one item. But today, the cost of convenience is so much higher due to technology.
America was built on a tax system to provide public infrastructure for many while encouraging people in business to grow the economy. It’s one big cycle, and right now the online impact along with our continuation of innovation through technology has caused disruption.
Technology is a good thing. Think about if we didn’t have Amazon. Getting a package in less than a week was unheard of, especially if it was delivered across the country or even the globe. But just like with everything, we can lose focus of how our current systems will be affected. We all just assume it will work itself out. In this case, I’d say the online retailers are loving that nothing has really been done since 1992.
Now today, several states including California, Illinois, New York and Tennessee have told Amazon and other exclusive online retailers that they must start collecting sales tax.
Face it, this entire episode is pretty immense and can be looked at through many different lenses.
The fact is that I do believe these state governments that are pushing for online retailers to also collect sales tax is important for the sake of the overall economy. Another fact is that local businesses and everyone else not up to the level of Amazon needs to quickly realize that they have the convenience and volume with their focus on technology all in their favor.
It won’t matter if everyone, whether you are a brick-and-mortar, online or kind of retailer we haven’t heard of yet, is on an equal playing field in terms of setting your price.
It will matter where the customer decides to buy. Brand loyalty, customer service and just the overall experience will decide who stands out in our capitalist society that collects sales tax.