“Internet Tax”: It’s a phrase that gives many consumers the chills. But in fact, many e-tailers are not fans either, fearing the headaches caused by collecting these taxes in addition to a possible drop in business that the extra charges would cause. However, there are those who favor this tax. Yes, ladies and gentlemen, brick-and-mortar stores view this as a way of “leveling the playing field” with online merchants. And politicians see these taxes as an open checkbook. That’s why you should know about the Streamlined Sales Tax Project.
The SSTP is promoted as a way to simplify the tax code. A large number of states, more than 40, have joined in supporting the SSTP. The plan would help the states collect sales tax from out-of-state merchants who have no physical presence in the state in which the sale took place. Software would be installed – voluntarily – on the participating merchants’ sites and would streamline collection procedures.
States have long complained that they lose tax dollars as more business is done online. There are reports that states say that this amount may be as high as $16 billion annually. Remember, if a seller and buyer are in the same state, the merchant is supposed to charge sales tax. Theoretically, that’s because the tax dollars will support things that a brick and mortar store need. For example, a store needs roads to accommodate shoppers. But an online e-tailer doesn’t need that support. What are those businesses getting for their tax dollars?
One could argue that those tax dollars could support the buyer’s community, not the sellers. But that’s not the way it works with the brick-and-mortars. Most people do leave their own immediate communities to do at least some of their shopping, so buying that sweater in the next county over benefits the neighboring county, not the one where the shopper lives.
Further, the argument that community retailers lose to online sellers because they don’t charge tax is specious. The vast majority of online sellers charge for shipping, which largely counteracts any discount that results from avoiding taxation. And even if shipping is free or a very small fee at those merchants, brick-and-mortars shouldn’t downplay one very distinct advantage they offer over their online competitors: Instant gratification.
The Direct Marketers Association (DMA) is opposed to forcing online retailers to collect taxes for state and local jurisdictions. The DMA believes such legislation will do nothing to reduce the number of taxing jurisdictions, which currently number more than 7,500 across the United States! In addition, there is some question about just how the collection process would be streamlined. Under the plan, a national collection center would be set up. How much information would this entity collect? What kind of personal information would be stored? For how long would those details be stored?
This is really a state issue, as President Bush has made is clear he does not, at least at the present time, support an Internet tax. If you are concerned about the logisitcs of this process, or about the privacy issues, let your governor and state representatives know. Because there’s only one thing that they like more than having more money to spend, and that’s getting reelected.