Sixty-four percent of U.S. consumers in states that require their residents to pay a sales tax on purchases either do not know or do not believe they are required to pay sales tax on Internet purchases if not collected by the vendor, according to a new survey by the International Council of Shopping Centers (ICSC). . . .Consumer compliance with the use tax payment on online purchases is generally low. A key reason for this, as the ICSC study found, is that consumers expect the vendor to collect sales taxes if they owe them.
The poll results include several other fascinating findings—among them, that “93% of consumers would continue to shop online if taxes were collected at the point of purchase” and “more than 50% of respondents cited ‘price’ as the most important factor when making a purchase”—and we recommend you review the complete results.
The second poll actually, and inadvertently, demonstrates the results of the first poll.
Conducted July 6-17, 2011, the latest USC Dornsife/Los Angeles Times Poll shows 46 percent of voters favoring the online sales tax as a revenue source to help balance the budget and pay for state services. Forty-nine percent opposed the measure, which would raise taxes and could hurt local businesses who sell products through online retailers such as Amazon.com.“At this point, Californians are evenly divided on whether online purchases should be taxed. This could be one of the most expensive campaigns in California history, and neither side starts with a clear advantage,” said Dan Schnur, director of the USC Dornsife/Los Angeles Times Poll and director of the Unruh Institute of Politics at USC.
The problem is, of course, that online purchases are already subject to sales tax, and always have been. By asking respondents if they support taxing online sales, the pollsters completely missed the point. The California measure they wanted to ask voters about would not, despite what they say, raise taxes. It would simply define which online retailers must collect the existing California sales tax on online purchases. We would have been very interested to see the results of a poll on the actual legislation; it’s too bad that the pollsters got this one so wrong.
But it does highlight the fact that, as the first poll suggests, there is a lot of misinformation out there about online sales tax collection. So we thought it would be helpful to address some of the most common myths about online sales tax collection and uncover what the facts really are.
Fact: Sales tax is already due on online purchases, whether or not the retailer collects it. This is true in all 45 states with sales and use tax laws—most of which were enacted more than 50 years ago. As we have said before, this is not a new tax.
We can’t say this enough: States aren’t implementing a new tax or raising taxes on online purchases.
Myth: Calculating and collecting sales tax for every tax jurisdiction nationwide would be too difficult for online retailers.
Fact: Today’s technology makes it easy for a retailer of any size to calculate and collect sales tax for every tax jurisdiction in the nation. It’s no more difficult than calculating shipping rates in real time, something nearly every online retailer does.
We can’t emphasize this enough: Calculating and collecting sales tax is no longer an administrative burden, not even for the smallest sole proprietorship. Inexpensive, even free, software and services (such as TaxCloud) are available to make this easy for any retailer. In fact, most small online retailers already use shopping cart services that are looking at the best way of providing sales tax calculation for their merchants. We promise, online retailers are not going to suffer because they have to collect sales tax.
Myth: It is only fair that internet companies are not obligated to collect sales tax. After all, brick-and-mortar retailers don’t have to charge for shipping.
Fact: Shipping costs are factored into the business model of internet retailers—if you want to sell something without the expense of maintaining a local store, you have to figure out a way to get the goods to the consumer. Online retailers’ current exemption from collecting sales tax is an artificial advantage, based on the inefficiencies of use tax collection (consumers get a lower price if they forget to pay the use tax). Sales tax was never intended to offset shipping costs.
Myth: Local retailers cannot claim that this is an issue of fairness—a bricks-and-mortar store is free to sell online and avoid collecting sales tax too.
Fact: Requiring local retailers to collect sales tax when online retailers don’t have to is unfair, plain and simple—regardless of whether a local retailer also has an online store. To take this argument to its logical conclusion, in order to make things fair everyone should just sell online—which would mean no local stores at all. Envision your community without a bookstore, coffeehouse, or clothing store; that’s not what anyone wants.