Internet Sales Tax: What Does It Mean For You?
In case you haven’t heard the news, Amazon is currently fighting for your rights as an online seller. If you enjoy not having to collect state sales tax from buyers outside the state where you do business, then you may want to throw your hat in the ring with the ecommerce mega-giant.
The issue at hand boils down to the fact that several states believe they are entitled to the sales tax that comes from Internet commerce. They argue that although an online store has no physical presence in the state, as the transactions are performed digitally, it creates an “unfair advantage” for the ecommerce sellers of the world who can charge less on interstate transactions because they don’t have to deal with sales tax. Local mom and pop businesses are having trouble competing (unless they sell online themselves). So states like California have made motions to go after ecommerce for sales tax.
What does this mean for you? A great deal, if states start passing these laws.
It’s no secret that many states and even the federal government are in a financial bind. Once the economy went downhill, some state leaders found themselves scrambling to recover funds. This included the lost sales tax revenues that resulted from well… people not buying stuff. In an effort to recover some of these lost dollars, they’ve taken the fight to online sellers to hand over sales tax.
However, Amazon (among other ecommerce pros) have their own ammo. Back in the early 90s there was a court case about mail ordering. The ruling of the Supreme Court at the time declared the mail-order company the victor in the case, even as it did admit that not having to charge sales tax gave them an advantage over other sellers. It remains to be seen if that ruling will hold up upon further scrutiny, or if it directly translates to this case.
Of course one of the main issues online sellers have with this is it could drastically impact their profits. Indeed, part of the reason states like California are bringing this fight to Amazon is to take some of the advantage away from them and give it to local businesses. One of the advantages to buying online is items are often cheaper as there’s no sales tax. If that’s gone, customers will just drive down the street.
Now that helping out small businesses and the economy is a bad thing. But online sellers fail to see how it’s fair to take away their business just because others are struggling. And in fact some brick & mortar stores that already pay sales tax also operate online. If this goes through, they will be forced to figure taxes in other states.
Which brings up another point – when figuring out the sales tax, it won’t be one clear number for every transaction. Each sale will be totally different depending on the state your customer lives in. So if you sell a shirt in Colorado, you must figure out what 2.9% of your sale is. If the sale takes place in California, now you’re figuring out 8.25%.
Fortunately, LogicBlock allows you to set different tax classes for different transactions. Even if the laws change, we will have your back so that you can continue to run your ecommerce store with ease.
That said, what do you think? Are you willing to take on the sales tax for a little “fairness” in the commerce game? Or do you think customers buying online is a sign of times and there’s no need to punish those who take advantage?