Sales Tax for E-tailers?

'Cause I'm the taxman
Yeah, I'm the taxman.
- The Beatles

As millions of online shoppers have discovered, shopping online usually comes with a nice perk: no sales tax. But states are once again pushing Congress to close the online sales tax "loophole."

It seems that every so often Congress takes up this issue and discusses whether or not online retailers should collect sales taxes on behalf of the states. The issue gets debated, goes nowhere, and things continue as they did before.

When Congress takes up the issue again (which could be as early as this week), however, the results could be different this time.

Most states are facing huge budget deficits, due to declining tax receipts from the downturn in housing, higher unemployment and a weak economy. According to the National Conference of State Legislatures (which is drafting the proposed bill), state sales tax collections are at the lowest level in 50 years. One way to boost those state coffers and help fill some of those budget gaps is to collect sales taxes from those who shop online.

Most retailers are in favor of this bill. Local retailers are already required to collect state sales taxes on purchases. Brick-and-mortar retailers with online websites also collect state sales taxes from shoppers that live in states where the company has physical operations.

So, it's only pure-play e-commerce sites that collect no sales taxes. If those companies are required to collect state sales taxes, it could alter the landscape of e-commerce.

Online shoppers are typically looking for the best price, regardless of the website. Paying state sales tax will add 5% to 10% to the purchase price. Larger e-commerce companies like Amazon (AMZN) and eBay (EBAY) are big enough to find ways to offset price increases from sales tax collections. They could cut operating costs, reduce shipping charges, or discount merchandise prices. For shoppers, prices would be the same as before, even with sales tax added.

For smaller e-tailers or those that are still unprofitable like Overstock.com (OSTK), collecting sales taxes could be disastrous. Those firms don't have the size or scale to keep prices low and collect sales tax, which would make them less competitive on pricing and less relevant in the industry.

Comments

[Mule:]

Small brick & mortar retailers have to collect the sales tax and they find innovative ways to compete against their large rivals. Congress has resisted parity of on-line vs. brick and mortar to promote the expansion of the internet. The internet is now mature and no longer needs this subsidy. Also, consumers believe they "got away" from paying the sales tax on their purchase but the states are now nickeling and diming us with increased fees that in the end the consumer is paying one way or the other.

Apr 20 01:01 PM

[golferj:]

It has nothing to do with the internet. Catalog retailers have always had the 'no sales tax' advantage so long as they did not have a phuysical presence in the state. True, the tax was 'owed' as a use tax but in practice no one paid it. There is no reason to change this now just because the states have been overspending and don't know how to cut expenses in bad times. It is time the states learned that there are limits to what a government could or should do


On Apr 20 01:01 PM Mule wrote:

> Small brick & mortar retailers have to collect the sales tax
> and they find innovative ways to compete against their large rivals.
> Congress has resisted parity of on-line vs. brick and mortar to promote
> the expansion of the internet. The internet is now mature and no
> longer needs this subsidy. Also, consumers believe they "got away"
> from paying the sales tax on their purchase but the states are now
> nickeling and diming us with increased fees that in the end the consumer
> is paying one way or the other.

Apr 20 02:40 PM

[Wake-Up!:]

Funny....

eBay is killing the seller with it's outrageous fees and now the government is going to kill eBay (along with other marketplaces) with it's outrageous fees. These two monstrosities don't get the big picture - not at all.

eBay believes raising fees beyond reason, is going to make them richer, quicker. Turn the seller into third world slaves - sell quantity at low prices, give eBay the majority of your profits and you'll do fine, right? *puke*

Enter Uncle Sam...The government believes taxing sellers (big and small) will make all the states rich, too. The end result (of course) is the consumer will incur these additional fees.

Many people shop online simply because of this tax-free incentive (especially on bigger ticket items). Unfortunately their greedy plans will back-fire. Countless numbers of potential online shoppers will simply stop buying (at least online).

Why would anyone shop online and pay the taxes too when they can easily buy their goods cheaper at their local Walmart - and we all know eBay has burdened sellers with sky-rocketing Final Value Fees and totalitarianism policies and put countless people out of business by stacking the cards against them.

The cost of shopping eBay already exceeds the cost of shopping at WalMart - now add tax to the equation! eBay will die quicker than it already is.

Look at the huge loss the US Post Office is taking - 2.3 billion dollars last year and they are still crashing. Their answer is to continually raise rates - again and again and again, yet the their bottom line is still suffering (they'll be raising rates again this May by the way).

Sometimes raising fees may not be the way to go. UPS is usually cheaper than using USPS and they include insurance! Who do you think is picking up the Post Office's business? *Hint... The one who offers more and costs less, of course!

They just don't get it, do they? These gluttonous hogs are going to put themselves right out of business along with millions of Americans. eBay can TARP, and us common folk...well.... we'll get another get a stimulus package for $12 dollars more a month.

jmo

Apr 20 04:32 PM

[x_powerseller:]

EBay's problem is not Sales Tax, but the DEVIL J.D.

Remember this one in 2008

www.youtube.com/watch?...


The devil got to go NOW!!!!

Apr 20 09:00 PM

[jay dee:]

Pretty obvious the person that wrote this article doesn't have a clue as to what he is talking about (as so many of these so-called analysts) when he states : " Larger e-commerce companies like Amazon (AMZN) and eBay (EBAY) are big enough to find ways to offset price increases from sales tax collections. They could cut operating costs, reduce shipping charges, or discount merchandise prices."
Ebay doesn't sell or ship anything, ebay's operating costs have no direct influence on the price of merchandise being sold on their website

Apr 20 10:58 PM

[Wake-Up!:]

Agreed Jay Dee!

-and to think "research" is their title...

Apr 21 10:23 AM

[TinyTim:]

The lack of a sales tax for online purchases compensates for the shipping costs. I would much rather give my money to UPS / FedX than Uncle Sam.

Apr 21 08:14 PM

[john s. gordon:]

well the online purchase saves a little gasoline too,

wakeup -
the USPS raises rates in order to drive away business, each time they drive away customers they have to raise rates again.
> jack

May 06 08:20 PM