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Thursday, May 10, 2012

Internet Sales Tax: Does it level the playing field?

Wishing my son, Sean, a happy 20th birthday!
Discussion has been ongoing for years regarding sales taxes and the Internet. Brick and mortar companies want to "level the playing field" while states want their share of the pie they have been missing since e-commerce has taking off many years ago.  So, let's look at some facts.

In the state of Georgia, you ARE required to pay sales tax on your internet purchases. Surprised? Don't feel bad. You and a lot of other people don't have a clue about this.  It is called a Consumer Use Tax. Matter of fact, according to the Georgia Tax website you should pay tax on shipping/handling charges as well:
"Individuals should remit consumer’s use tax on the total amount paid for the items purchased including any amount paid for shipping and handling charges, warranties, labor charges, and other taxable services."
So, why are they pushing for the Internet Sales Tax? Well, because they can't easily go after those that ignore or are ignorant of the tax law, it is much easier to pass laws requiring companies to collect and submit the tax. But can they do that?

In 1992, the Supreme Court ruled in Quill Corporation v. North Dakota that a state cannot force a retailer who doesn’t have any physical presence in that state to collect sales taxes from Internet, phone or catalog sales. So how is Georgia trying to get around this?
"The objective is to subject purchases made at retail stores and on the internet to similar sales tax rules. The bill adopts “click through” nexus for internet retailers and their affiliates. For example, under the bill, Amazon would have to collect sales tax from Georgia customers so long as Georgia businesses use Amazon's web-based platform. Should Amazon choose to terminate all of its contracts with Georgia-based businesses, as it did in North Carolina when similar legislation was passed there, then the bill will become futile."   Source: http://www.gscpa.org/Content/22789.aspx

Realistically, it is a gamble that could actually hurt the numerous individuals and small businesses here in the state that utilize places like Amazon for their sale and resale platform. Amazon has not had a problem doing this before and has threatened to do it in other states as well.

Obviously, in a poor economy, the state is trying to find ways to increase the revenue and they have the support of Georgia businesses that feel that the internet sales tax is going to make a different in their bottom line.  This bill has already passed the House and Senate and it is heading to the Governor to be signed.

Here are some of my personal opinions about Internet vs local retailers. 
  • When looking for specific items, I prefer the wide selection of items I can find online. If local retailers can't maintain an inventory of quality items people prefer, it would be no different than walking out the door and finding another store. 
  • Living in a rural area, makes it less likely for me to find a store nearby that carries items I want or need.
  • There are many items, like shoes and clothing, I am more likely to purchase locally.  
  •  The sales tax (7% in my neighborhood) would not make me start searching online if I am already in the store.  Of course, big ticket items may make a greater impact but I don't buy that many big ticket items to have a comparison. If the price is high, I am more likely to buy used. 
  • I will not browse stores and then shop online unless the price is really high (in which case, again, I may look for used items). 
  • Reviews are especially important when I am looking at products. It plays a significant roll in many of the items I purchase. I do not like returns, online or locally.
  • Brick and mortar businesses that provide online shopping sites for their customers and competitive prices have little to be concerned about when it comes to the sales tax issues. They can provide services (such as trying items on for size) that online stores cannot effectively compete against. 
I would love to hear your thoughts. Share them here or on Facebook.


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