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Internet Sales Tax Coming?

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  • Internet Sales Tax Coming?

    This is a short article about proposed legislation to add an internet sales tax.

    Cannen's opinion:
    I'm of two minds about this but one thing is for sure, internet sales are very unfair to a brick and mortar store. An internet store doesn't usually require a big staff. An internet store doesn't have to buy products for a show room nor do they have to pay for a storefront. Sure, we have to have hosting and all of that, but it costs nowhere near the amount it does for a B&M.

    Also, what about tax revenues for a state? I buy something from California while living in Michigan. Neither get any tax revenue.

    Personally, I'm sick of people coming into our B&M store and saying that they can get it cheaper on ebay. Especially when our prices are good. When you can sit in your basement and and make $0.05 per product, how are traditional stores going to compete? People work at these stores and have families to feed. Then a customer will come in and say that they found something on the internet. They pick the sales persons brains, suck up the heat/air conditioning, touch and play with the product, and then go buy it for $10 less at an online store. They didn't put anything into the local economy but then complain when their city is facing a budget short fall, their schools are in disrepair, their population is falling, teachers are being let go, kids are getting crowded into larger class sizes, and emergency services are getting cut-back. Buy hey, the guy saved $10 and didn't have to pay sales tax. Internet for the WIN!

    This is all setting aside that fact that small businesses and other B&Ms employ people. People who buy our online products. We are getting to the point where things are getting serious. The internet is akin to Walmart moving into a small town. How are a mom & pop going to be able to compete against a company that can sell products for less than the mom and pop can buy them for?

    I don't know. It just all seems pretty unfair to me. It's supposed to be about competition. A B&M is like a boxer with his hands tied behind his back and the other boxer is bare-knuckled. Unless the B&M offers a good or service that can only be purchased from them, they are in a bit of trouble.

    On the flip side, an internet store has to pay for shipping in some way. Also the customer has to wait a period of time before the product will arrive. I think if there is an internet sales tax, it should be be a different amount than standard state tax. Internet sales have some disadvantages, but we can't handicap them either and go too far in the other direction where it becomes unfair to them.

    What do you guys think?

  • #2
    Tax Jurisdictions

    Just think of the manpower, headaches and probably penalties if internet sales are taxes. That means an internet seller will be responsible for knowing the tax rates & due dates in EVERY jurisdiction they ship to & will have submit timely payments to same. Using our own for example- You sell $1 and ship it to Carroll County, Georgia. You owe .07 cents that is due within 16 days of month end. So now your cost is .07 + cost of postage. If you don't file timely and your .07 amount due is now $5.07 with an additional $5 per month added plus interest.

    Multiply that by How Many Jurisdictions?


    • #3
      Yeah, that's the problem. Everyone thinks that everyone else needs to follow their sales tax rules. If they are going to do it, what they need is one tax rate that applies to everything. Say a 3-6% tax that applies to physical goods and no tax on a food item. The only problem with that is, different states have different definitions for everything. A food in one place isn't necessarily a food in another.

      They are making it way more complicated than it has to be and that will be it's failure. It would increase the burden on an internet business by a great deal. Then, the pendulum will swing in the other direction and make it unfair to online merchants because local businesses won't have to collect the same amount of taxes that we will.


      • #4
        Internet Sales Tax?

        I'd bet that will kill a lot of online sellers (hassle factor) and sway a lot of online buyers back to b&m stores. I know; in a retail store there's no shipping charges, but most online buyers don't look at that. If they know there's no sales tax, a lot of people think they're saving money.

        I have a NC tax number & one of my wholesalers want me to get a CA number for CA buyers. That's if I have something shipped directly from them. I haven't done it yet. Still deciding if I'll use them.


        • #5
          Many "drop ship" vendors require a Sales & Use Tax Certificate for states they have an office in. For example, if a vendor ships a purchased product on your behalf to a resident in a state they operate in (or have an office or distribution center), they are required to charge sales tax. This holds true even if they ship from a distribution center in UT to a customer in CA. If they have an office in CA they must collect the tax. The certificate you provide, exempts them from collecting tax and it becomes the mercahnt's responsibilty. If the merchant can certify that the product is trully a resale, many states will allow you to get a certificate even if you are not located in their state. But, most don't. You should be able to download the certificate forms for each of the states. If applicable, fill them out and forward to your vendor. HTH
          Last edited by; 08-07-2010, 09:23 AM.


          • #6
            States. How about counties and cities

            In GA we have 159 counties and the City of Atlanta. Each of these 159 counties and Atlanta has up to 6 variables that impact their sales tax rate. Of course one only has to file ONE form with the state but one has to break down sales and applicable taxes by county. If this internet sales tax thing gets passed I'm afraid we will just keep on, keepin on and wait for each juristriction to audit us. LOL.

            Write your Senators and Congressmen.


            • #7
              We have had b&m stores for 20 years and more recently internet stores. We've had a situation where a store was located very close to an area that collects metropolitan transit taxes and we asked the state comptroller's office and the local MTA office if our store fell in the MTA district. No one knew the answer. They told us to ask a neighboring business what they were charging and use that. If they don't even know, how in the world can a business owner know and much less one from out of state. This would be a real problem, can you imagine having to file sales tax returns in 50 states and keep all the sales tax laws/rules of each state straight. Probably it would be better if each state just required you to tax all transactions based on where it ships from and then you would just collect your local tax rate on everything and submit it to your state. Some states wouldn't like this though as they have chased away the small businesses in their state with their high tax rates.


              • #8
                Probably it would be better if each state just required you to tax all transactions based on where it ships from and then you would just collect your local tax rate on everything and submit it to your state
                That's how IL is. Though IL has quite a number of different rates in different areas we only have to charge sales tax to IL residents at our local rate.

                There's a supreme court ruling that would have to be overturned to charge tax to out of state residents if you don't have a presence there.

                My guess if it did come to pass the only difference would be that we'd charge everyone our IL sales tax.

                Any states that pass this (and I believe it's coming) without the other states doing so would certainly put that states sellers at a disadvantage.