Should you pay sales taxes for Internet purchases?

The Associated Press

Tax-free ... for now.

Featured Topic | Posted 1 week 4 days ago

Should you pay sales taxes for Internet purchases?

One advantage Amazon.com has had over brick-and-mortar retailers has been simple: No sales tax. Internet retailers have long avoided paying -- and charging their customers for -- the sales taxes that must be charged by their meatspace cousins. The real-world retailers have complained that the cyber-business thus has an unfair competitive advantage.

Now New York is trying to force out-of-state Internet retailers to collect taxes on purchases made by New Yorkers. Amazon is suing, saying the new law is unconstitutional, vague and overly broad.

Should states be allowed to charge sales taxes on Internet retailers?

Ben likes: Tax will hurt small businesses

Jonathan I. Ezore/Newsday

When news of the new "Amazon Tax" spread, most New Yorkers probably thought it just meant they'd have to start paying a little more when they ordered online merchandise. But the law, passed in Albany last month, is likely to have a far greater effect on small businesses than it is on consumers.

Critics of the new law say it is unworkable because tracking multiple sales tax rates is difficult - particularly for smaller retailers - while supporters counter that software tools are making this easier. But the reality is that Amazon and other merchants with affiliate programs won't bother adding the additional capability to collect New York tax; instead, they'll take the far easier step of blocking any New York-based site from their affiliate programs. The result will be a tremendous loss of income for the numerous small New York businesses now participating in affiliate programs.

If New York wants a larger share of online sales tax revenues, it should focus on making the state more attractive for online retailers to set up shop here, and improve enforcement of existing tax laws. Instead, the Amazon Tax will hurt New York's small online businesses and entrepreneurs, and ultimately may lower overall tax revenues, while strengthening New York's reputation as being unfriendly to small businesses.

Joel likes: The case for online sales taxes

McClatchy

As brick-and-mortar retailers struggle in this tight economy, online sales continue to grow. One reason is their tax-free status.

Not only is this unfair competition for local business; it deprives public agencies of substantial sales tax revenue.

The competition factor has a large ripple effect. When local retailing operations diminish, jobs are lost and companies don't spend as much for everything in the local economy from site costs to advertising.

One can't whine about competition itself. Many customers like shopping online, and companies push those sales right along with sales in their stores. But unfair competition is something else, particularly when provided through unequal taxation.

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Submitted on May 6th, 2008 by Cycle_Geezer

I'm one of the guilty parties myself. Dodging the sales tax thing that is. Most states already have a mechanism by which you are supposed to pay sales tax for online purchases, but there is really no enforcement mechanism, so who complies?

The continued dodging of sales taxes through online purchasing will eventually result in local income taxes, or higher local income taxes in municipalities that already have income taxes, and higher state income taxes. The states and cities won't go without that revenue forever.

No taxes for online sales

Submitted on May 6th, 2008 by Anonymous

The government should work *for* and *with* the people, not against them. The government can't act like a separate entity with its own desires trumping those of the citizens. If a citizen wants to find a way to legally circumvent certain taxes, then the government should stand back and let it happen. Yes, this may result in lost revenues, but that can't be a deciding factor. Forcing internet sales to include sales taxes is like forcing Hybrid buyers to pay an added registration fee, due to the smaller amount of gas taxes they pay.

Point taken.

Submitted on May 5th, 2008 by The Big Klosowski

However, I think it would probably do a bit of both, because I wouldn't spend the cash with local businesses either. Sometimes if it is a local only product, I won't buy it because the sales tax actually makes it less affordable, so I don't purchase anything.

Take for example the latest camera I had to buy for our photography business. It was $4k online, which I could just barely afford. The local place sells it for $4450 + tax. Tax would have added over $320 to my purchase. As it was barely affordable without tax, with tax I would have just waited another year or so to buy anything at all.

So you'd rather kill bricks-and-mortar business instead?

Submitted on May 5th, 2008 by Joel

Because the online folks are getting an unfair competitive advantage. That might be a great way to encourage online retailing, but it's a lousy way to treat established businesses.

This would kill online businesses.

Submitted on May 5th, 2008 by The Big Klosowski

I must confess, I do all my shopping online precisely for this reason. Without it, I would most likely not do any shopping online at all.

Answer

Submitted on May 5th, 2008 by Joel

As I understand it: Colorado. Why: I'm not sure why the sales tax would be charged in the purchaser's home state as opposed to the seller's. But that doesn't just happen online. In some states -- Kansas being one -- the taxes you pay to buy a big-ticket item in one county (a car, say) gets collected in the county where you live.

Question

Submitted on May 5th, 2008 by Anonymous

I live in Denver. I bought a graduation present online from a store in Illinois. The store is using a computer server in Massachusetts. They had it shipped to my nephew in California direct from the manufacturer in Georgia. Tell me which states are supposed to collect sales taxes and why.