Amazon makes a deal with Indiana. Who’s next?

January 24, 2012

Indiana has been a member of the Streamlined Sales and Use Tax Agreement (SSUTA) since 2005, so we here at FedTax were surprised when we heard that affiliate nexus legislation (sometimes called “Amazon tax”) was being proposed there (H.B. 1119). Regular readers of this blog know that affiliate nexus laws expand the definition of nexus to include affiliate marketers— locally based websites that provide marketing for out-of-state merchants. Affiliate nexus laws are generally ineffective because, time, and time, and time,  and time again the impacted e-commerce retailers have demonstrated their willingness to sever ties with their in-state affiliates so they can avoid being singled-out as the only remote retailers being required to collect.

We were very pleased when we learned this was not going to happen in Indiana.  Governor Mitch Daniels announced that Amazon has agreed to begin collecting sales tax in Indiana in 2014—or even sooner if Congress enacts guiding legislation, like the Marketplace Fairness Act  (S.1832). In exchange, the Indiana legislature will not advance the proposed affiliate nexus legislation. As an additional benefit, the Indiana-based Simon Property Group (the largest shopping mall owner in the U.S.)  has agreed to suspend its lawsuit against the Indiana Department of Revenue over its failure to require Amazon to collect sales tax despite its three distribution warehouses in the state. Governor Daniels said that Indiana is the 4th state with such a tax collection agreement with Amazon, joining California, Tennessee, and South Carolina.

Now even more states are considering similar legislation. We do not intend to hatch a conspiracy theory, but some could draw the conclusion that these bills are being used as an indirect method of “requesting” that Amazon open distribution centers in their state. We hope Congress will act soon to end all this craziness.


LA Times: “Level the retail playing field”

December 13, 2011
LA Times

LA Times: Level the retail playing field

Yet another major news outlet has spoken out in favor of online sales tax collection. An editorial in the Los Angeles Times says that current sales tax law unfairly favors online retailers over bricks-and-mortar stores.

The LA Times joins many smaller outlets that have already published editorials advocating online sales tax collection. We strongly recommend this particular editorial because it not only gets all the details right—that sales tax is already due on online purchases, that pending legislation includes an exemption for small businesses, and more—but it also poses a thoughtful argument that considers not just the fairness of online sales tax collection but also the political realities surrounding it.

The editorial ends with this concise summary:

Sales taxes are an important part of the revenue mix for governments because, as consumption taxes, they don’t penalize labor, investment or productivity the way other forms of taxation do. And if states decide to impose a sales tax, they should be able to impose it fairly and effectively. The bipartisan online-sales-tax proposals are a way to accomplish those goals. In the process, they would help states close their budget gaps by enforcing existing laws rather than raising tax rates. Most important, they would eliminate the undeserved competitive advantage some online sellers enjoy because shoppers don’t know or don’t care that they’re obliged to pay taxes.


Online sales tax collection debated in Wall Street Journal

November 15, 2011
Wall Street Journal

Wall Street Journal: Should states require online retailers to collect sales tax?

The Wall Street Journal has published a debate on online sales tax collection. Taking the pro side is Michael Mazerov, Senior Fellow at the Center on Budget and Policy Priorities in Washington, DC. Taking the con side is Steve DelBianco, Executive Director of NetChoice, a “coalition of e-commerce and online businesses.”

Both sides are clearly and cogently presented, and we highly recommend the article. Of course, as our regular readers know, we’ve long been advocates of the “pro” side. Mazerov does a terrific job of explaining why online sales tax collection is necessary and countering the most common objections to online sales tax collection, while DelBianco’s argument boils down to “it’s too difficult for small businesses.”

But we’ve worked hard to make sure that that’s not true. TaxCloud is designed specifically to remove the cost and complexity of online sales tax collection: It not only provides real-time sales tax calculation, it also handle exemptions and audits—plus, it’s easy to use and completely free.

A quick correction: At the head of the article, the description of the current sales tax situation says that state and local governments are pushing Congress to “require all online retailers to charge sales taxes in all states.” (emphasis added) “Charge” here should be “collect”—as we’ve said many, many times, sales tax is already due on online purchases. The question isn’t whether online retailers should charge (let alone, as some have suggested, pay) sales tax; no matter what, consumers owe sales tax on their online purchases. The question is whether online retailers should be required to collect sales tax. And the answer . . . is “yes.”


Debunking another online sales tax myth

October 28, 2011

We’ve started seeing a new line of argument against online sales tax collection in many articles and editorials. It goes something like this:

“An online store shouldn’t have to collect sales tax for a state it doesn’t have a physical presence in because it doesn’t benefit from any of the things sales tax pays for, like firefighters and police. If a store is located in California, why should it collect New York sales tax when that sales tax goes to pay for projects and services in New York?”

This argument would make sense if the online store were paying, not collecting, sales tax. But that’s not the case. It’s the store’s customers who are paying sales tax, and they do benefit from the firefighters, police, libraries, and more that sales tax revenue helps pay for.

Online stores pay taxes wherever they’re located to help pay for the services that their offices benefit from. All that has absolutely nothing to do with whether or not they collect sales tax. Collecting sales tax is—or rather should be—simply part of selling online, just as it’s part of selling on Main Street.

To sum up: The sales tax you pay funds projects and services in your community. That’s as it should be. Collecting sales tax? That’s just part of doing business.


Small business owner makes argument for online sales tax collection in NY Times

October 27, 2011
The New York Times: Small Business: "You're the Boss"

New York Times: Occupy Wall Street? Who Will Occupy Main Street?

There’s a terrific new post up on the New York Times‘ “You’re the Boss” blog. Written by Jay Goltz, a small business owner from Chicago, it makes a great argument for online sales tax collection.

We strongly urge you to read the entire post yourself, but we couldn’t help quoting from parts of it:

On browsing in local stores but buying online:

I have a friend who owns a shoe store, and he tells me that people come in all of the time, try on some shoes, spend half an hour with a member of the sales staff, and when they have made a choice they announce that they are going to order the shoes online — as if it is something to boast about. Boasting to your friends is one thing; boasting to someone who has just spent time trying to help you is rude at best. 

On the ultimate consequences of browsing locally but buying online:

What happens if your local retail stores become a showroom for online stores to such an extent that it forces them out of business? Are you perfectly happy not touching and trying out products? It has already happened with the closing of hundreds of Borders book stores. This is not a level playing field — and I say this as someone who has both retail outlets and substantial online sales.

It’s also happened with several Barnes and Noble locations. When one Manhattan location closed last year, the New York Times interviewed several browsers at the store, and most said they liked to visit the store but didn’t buy anything. They preferred to buy online.

On how the loss of sales tax revenues hurts communities:

Zappos does about $1 billion in sales every year. If Chicago represents 2 percent of the company’s business, that would be $20 million in annual sales. That represents about $2 million dollars of sales tax that the city no longer gets — and no longer gets to use to pay for police, firefighters, teachers and street repairs . . . . How much more is being lost on sales by Amazon (which owns Zappos) and all of the other online retailers?

The loss of sales tax, as well as the loss of the real estate and payroll taxes that those closed stores used to pay, is damaging your city and state. This is a zero-sum game. You may think that if a local store can’t compete with Zappos or Amazon, that’s the store’s problem. And you may be right. But why do the rules favor Zappos and Amazon? Not forcing them to collect sales tax has given them an unfair advantage that ultimately will force all of us to pay higher taxes to local governments.

On local stores and the community:

Saving money online can be a pleasure. But these local stores employ your friends and neighbors, spend millions of dollars in your community, and are hardly taking advantage of anyone. . . . Whether it is the local frame shop, furniture store, luggage store, florist, shoe store, bicycle shop, or eyeglass store, many are struggling. If they are doing well, they are not doing that well. Most stores are not ripping people off. They are trying to make a living, give service, support employees and pay taxes — and they are getting challenged by large companies that can buy cheaper but don’t necessarily provide better value.

This is a fantastic post, and we highly recommend that you head over to the New York Times and read the entire thing.


Joan Wagnon, FedTax EVP, quoted in Fox News article

October 27, 2011

Fox News: Republicans Go Big With New Tax Structures, but Status Quo Could Stifle Simplicity

Our own Joan Wagnon, Executive Vice President here at FedTax, was quoted in a Fox News article about Republican presidential candidates’ tax proposals.

It’s not the first article she’s been quoted in, of course—Joan’s background in public service includes positions as the secretary of revenue for the state of Kansas, chair of the Multistate Tax Commission, president of the Streamlined Sales Tax Governing Board, and mayor of Topeka. But we’re always happy to see her expertise in tax matters recognized. We trust her opinion without hesitation, and her analysis in the article is once again spot-on.


UT small business owners urge Congress to pass online sales tax legislation

October 26, 2011
Utah

Utah's small business owners want online sales tax collection

According to an article in the Wall Street Journal, small business owners from Utah traveled to Washington, DC, to “meet with members of Utah’s congressional delegation and Congressman Steve Womack, R-Ark., who introduced states’ rights ‘e-fairness’ legislation last week.” Although the article doesn’t specifically say so, it certainly sounds like the reason for the visit was to persuade Utah’s congressional delegation to support online sales tax legislation.

The article quotes small business owners making some good points about online sales tax collection:

“Small businesses across the state of Utah are struggling,” said Jared Hurst, owner of Rebel Sports, “and the unfair advantage given to online retailers hurts Utah businesses and local communities.” . . .

Betsy Burton, owner of the King’s English Bookshop in Salt Lake City, also supports Womack’s legislation. Her bookstore now draws cutthroat competition from online retailers such as Amazon.com.

“This is a huge economic issue,” said Burton. “Internet sales are getting bigger and bigger and if we can’t compete on this unlevel playing field, it will drive bricks-and-mortar businesses out of business. And we are the backbone of the economy.”

She’s not kidding. For every $1 million in new sales, Amazon creates 0.88 jobs. For the same $1 million in new sales, Best Buy creates 3.47 jobs.

The chair of the Utah Tax Commission, Bruce Johnson, also made a good point, one that we’ve heard many times from local retailers:

“People will go in and shop at a bricks-and-mortar retailer in Utah to get specifics,” Johnson said, “and then go buy the product on the Web to save sales tax.”

An executive at O.co (formerly Overstock.com), which is also based in Utah, repeated his company’s concern that it’s too difficult to collect sales tax for all states.

We know that’s not the case. We know that because we designed TaxCloud specifically to eliminate all the complexity and confusion of online sales tax collection.

We recommend that O.co executives take a look at TaxCloud. It’s comprehensive, easy to use, and FREE.


Round-up of recent press on online sales tax collection

October 3, 2011
Recent press

Recent press on online sales tax collection

We’ve been looking at the recent editorials and news articles on online sales tax collection, and we’re encouraged to see that most of them are in favor of it—a position that we’ve long argued to be practical, sensible, and simply right.

From the Tulsa World, “Only fair: Online sales tax is necessary”:

No one likes paying taxes. They are, however, necessary to keep a city and state running. You might not like a sales tax, but you certainly like good roads.

If we’re going to have taxes, it is imperative that everyone pays their share. For years, some shoppers have been skirting local and state sales taxes by purchasing items online that are available locally. That is not fair to those who support local businesses and keep their cities running with local sales taxes. . . .

States and cities . . . need the income that they have coming. Local merchants, who choose to do business here and employ Tulsans and spend their hard-earned money with fellow local merchants and pay their sales taxes, deserve a level playing field. 

From the Bismarck Tribune, “Main Street Fairness Act: A bill to close the sales tax loophole”:

Studies show that states are losing about $23 billion annually in sales taxes. The tax is legally due on purchases but goes uncollected because the seller is not required to collect the tax and the purchaser fails to report and remit the tax due. This situation creates a huge disparity and an extreme disadvantage for our main street retailers who are competing with retailers selling over the Internet or by some other remote means. . . .

The Main Street Fairness Act addresses the issue of fairness and levels the playing field for all retailers. . . .

Cities, counties and state government rely on sales and use tax revenue to provide services to our residents and to build and maintain a high quality infrastructure for the businesses operating here. The Main Street Fairness Act is an important bill for the retail industry and states—it provides for fairness across the retail industry while permitting individual state sovereignty and supporting a fair sales tax system. . . .

The proposed legislation will go a long way to support and encourage growth in our local North Dakota businesses along with main street retail industry across the country. We encourage Sens. Kent Conrad and John Hoeven and Rep. Rick Berg to sign on to the legislation and support it when it comes up for a vote.

From the Detroit Free Press, “Online sales tax collection rules would level playing field and add funds to state”:

Main Street retailers, the backbone of America, stimulate local economies, build communities and provide good, stable, local jobs. In July retailers added 26,000 jobs to the national economy.

However, these jobs are being threatened by online retailers fighting to preserve an unfair price advantage of 6% over brick-and-mortar stores in Michigan. . . .

In today’s marketplace, the shape of commerce is changing, but the rules remain stuck in 1992—well before the era of the iPad, smart phones and even home Internet access. Online-only retailers are exempt from collecting sales tax at every point of purchase. . . .

Many consumers are often unaware that the tax on online and catalogue purchases already exists. When an online retailer fails to collect the sales tax, it falls to the consumer to report that tax directly to the state, which is often not done.

The Center for Business and Economic Research estimates that this year Michigan will lose more than $125 million in revenue due to the Internet sales tax loophole. As legislators grapple to fill budget gaps, this revenue would go a long way toward adequately funding essential public services: paving roads, keeping police and firefighters on the job, and providing our children with a quality education.

States have been compelled to take action in the absence of a national approach to sales tax collection. But a possible solution is the Main Street Fairness Act, introduced in Congress in July. The bill is designed to grant states the authority to set up a simple and equitable system of tax collection on remote sales and, ultimately, the ability to collect these taxes at the point of purchase. . . .

We need a 21st Century framework to ensure a marketplace that benefits online retailers in addition to brick-and-mortar retailers, who provide good local jobs, support our communities and drive America’s economy.

Our country is overdue for a national solution to the issue of sales tax collection.

From Gazette.net (Maryland), “Inaction on Internet sales tax hurts states”:

For Maryland, collecting sales tax on Internet purchases could yield additional revenue estimated to be in excess of $200 million annually, which the state sorely needs to bring budgets into balance given the lagging condition of our local economy and continued structural deficit.

Without this revenue, which is rightfully owed to the state, programs such as Medicaid, K-12 education and our transportation infrastructure needs will be unmet without additional tax increases. . . .

More importantly, though, such a policy change would level a slanted playing field for bricks and mortar retailers who invest in our local communities and currently charge and collect taxes on sales via the Internet. . . .

Moving forward . . . our federal representatives and Congress as an institution should end this debate and do what’s right for state governments and more importantly for countless mom-and-pop retailers that serve as the backbone of our nation’s economy.

From the Midland (MI) Daily News, “Local businesses like proposed Internet sales tax legislation”:

Legislators hope a newly proposed online sales tax bill will equalize what they consider an unfair playing field between Web retailers and small businesses. . . .

Michigan would save up to $141.5 [million] in lost sales tax revenue if the [state] bill becomes law, improve sales at brick-and-mortar retailers by as much as $126 million and create up to 1,600 jobs, according to a report from the Lansing-based Public Sector Consultants.

Jerry Meier, owner of Meier Camera Shop, 122. W. Main St. in Midland, said he cannot believe the state has chosen to miss out on those tax dollars for so long.  “We’ve wondered about this for some time. I think it’s going to make a difference,” Meier said. “Everyone says ‘buy local,’ but when it gets right down to it, they look at (online retailers) as an advantage.”

A 6 percent disadvantage when it comes to sales taxes makes a large difference in the long run, he said. . . .

“Legislators we’ve talked with understand that a sale is a sale is a sale regardless of where it takes place,” said Tom Scott, senior vice president of the Michigan Retailers Association. “Government should not be picking winners and losers by favoring one type of retailer over another — especially when it’s our hometown Michigan retailers who are being hurt by the current situation.”


California-Amazon deal gives hope to states and the Main Street Fairness Act

September 30, 2011
Stateline.org

Stateline.org: Amazon deal with California may set precedent for online tax collection

According to an article on Stateline.org, the deal between Amazon and California on online sales tax collection gives other states hope that they, too, may get online retailers to collect sales tax—though they do not have as strong a position for negotiating as California:

Now that the largest state in the country has seemingly pressured Amazon to change its policy, the result could be a flood of new online tax laws, as other states ask why Amazon can’t treat them the same as it treats California. Danny Diaz, spokesman for the Alliance for Main Street Fairness, a group trying to get the online retailers to collect taxes, says Amazon has undermined its own case by striking the California deal. “You begin your argument by saying you can’t do it, it’s too complicated, it’s unconstitutional and all of this,” Diaz says, “and you end your argument by saying you’ll do it in a year, it’s legal, you can do it. Clearly, clearly the ground has shifted underneath your feet.”

Other states, though, might not be in a position to get the same deal as California. For one thing, Amazon had more of a presence in that state than simply a bunch of affiliates. The company had several wholly-owned subsidiaries in California, which made it tougher for the company to claim that it lacked a physical presence.

The other difference is that California is simply bigger, which may have made Amazon leery of cutting its ties there. Last Friday, the company said it would add 10,000 jobs in the state in coming years. “When you’re California or New York across the table from an Amazon, it’s a pretty big slice of the market,” says Kevin Sullivan, commissioner of the Connecticut Department of Revenue Services. “We don’t have the leverage that a New York has or the leverage that a California has.”

But, the article continues, the Amazon-California deal inspires even more hope that federal legislation on online sales tax—which would make state-by-state laws unnecessary— will finally pass:

For now, Amazon isn’t indicating that it will offer other states the same deal it offered California. But the company is saying what it would like to have happen next: a federal solution. “We’re committed to working with Congress, retailers and the states to pass federal legislation as soon as possible,” Paul Misener, Amazon’s vice president of global public policy, said in a statement after Brown signed the law. That isn’t a new position. Amazon’s case has long been that it isn’t against collecting sales taxes, so long as a federal deal also makes collecting the taxes less burdensome.

That’s actually what most state officials want, too. Legislation in Congress known as the Main Street Fairness Act would require online retailers to collect sales taxes in the state where a purchase is made, but only if the state is among those that that have made their sales taxes more uniform through an interstate collaboration known as the Streamlined Sales and Use Tax Agreement.

When state legislators came to Washington last week to give their view on federal debt negotiations, one thing they asked Congress for was passage of the Main Street Fairness Act. With Amazon and big brick-and-mortar retailers like Wal-Mart and Target forming an unusual coalition in favor of a federal law, their hope is that their side has the clout to win passage. If the California deal adds urgency to the efforts, all the better. “We’re going to face hundreds of millions, billions of dollars in [aid] reductions,” says Neal Osten, director of the National Conference of State Legislatures’ Washington office. “This is something Congress can do for the states.”

With Amazon, Walmart, Target, and many more major retailers (not to mention the Retail Industry Leaders Association) all joining state legislators from both sides of the aisle in supporting the Main Street Fairness Act, surely the bill’s time has come.

“Still,” the article says, “there are reasons for skepticism.”

For one thing, some online retailers are still taking a hard line against collecting sales tax. Jonathan Johnson, president of O.co (formerly known as Overstock.com), points out that Amazon’s size and wealth positions it to cope with differing sales tax rates and definitions around the country. Smaller online companies might suffer more. “I think the Main Street Fairness Act is anything but main street and anything but fair,” Johnson said in an interview with Stateline. “Big retailers would like to create a barrier to entry for any new company.”

The other reason for doubt is that Congress has struggled to forge compromises on all big issues lately. A proposal that would result in more taxes being collected—even if the taxes are legally already owed—will be an especially hard sell, even if the failure to pass it will likely result in a new round of messy fights between states and online retailers.

If these are the only arguments standing in the way of the Main Street Fairness Act, then we take heart. There are reasonable answers to these objections.

First, the notion that “the Main Street Fairness Act is harmful for small online retailers”: It’s really not. Technology has reached the point that today, it’s no more difficult to collect sales tax online than to calculate shipping rates. Look at TaxCloud, a comprehensive sales tax management service that’s available at no cost for retailers. With services like TaxCloud available—again, at no cost—there’s no reason for any retailer, no matter how small, to find it difficult, costly, or burdensome to collect sales tax.

Second, there is this scare statement that “the Main Street Fairness Act is a hard sell in Congress”: We disagree. While it is easy to simply say things like “it will never happen” or “Congress is too divided,” nobody in Washington DC is saying that about this issue (except for the ATU and NTP). In fact, it’s one of those rare bills that has bipartisan support. It may have been introduced by a Democrat, but it has lots of Republican supporters, among them Senator Bob Corker (R-TN), Senator John Boozman (R-AR), and Tennessee Governor Bill Haslam (not to mention all the Republican supporter in state legislatures, such as Luke Kenley (IN) and Evelyn Lynn (FL), to name just two). We think that once hard facts overcome all the inflammatory rhetoric about the Main Street Fairness Act, voting for it should be a pretty easy decision.

The Stateline article is well worth reading in its entirety for its thorough summary of the arguments for and against online sales tax collection. Just keep in mind that the arguments against it aren’t the last word.


Sales tax is already due on online purchases

September 26, 2011

States where internet purchases are taxableAs the internet is abuzz with news of Gov. Brown’s signing of AB 155 last week (the Amazon/California compromise), we’ve noticed a disturbing trend among articles responding to the news. Frequently there is a reference to “tax-free online shopping,” or some kind of warning along the lines of, “if you want to buy online without paying sales tax, hurry, before it’s too late.”

But of course, if you live in a state with sales tax, you already owe sales tax on your online purchases. You always have. Regardless of whether or not the online shop collects sales tax when you make your purchase, you owe the state sales tax on that purchase.

While the debate over whether online retailers should collect sales tax continues (as our regular readers know, we come down firmly on the side of “yes,” for many good reasons), whether or not online purchases should be subject to sales tax is not in question. They already are, and always have been.

We hope that newspapers and pundits will get this right in the future, so that they don’t mislead the public. There are real consequences to believing online purchases are tax-free. If sales tax isn’t collected by the retailer at the time of purchase, you need to pay it on your annual income tax returns. If you don’t—well, let’s just hope you don’t get audited.

(For more myths and facts about online sales tax collection, see our earlier post.)


California’s latest twist in sales tax battle will hurt local retailers in favor of a certain online auction site

August 27, 2011
Los Angeles Times

Los Angeles Times: New online sales tax legislation

According to a Los Angeles Times article, the next move in the battle over California’s online sales tax collection law comes from supporters:

A coalition of giant, brick-and-mortar retailers and their legislative allies have come up with a new strategy to try to head off Amazon.com’s referendum to overturn the state’s new Internet sales tax law.

On Thursday, lawmakers amended a bill in the Senate Appropriations Committee and sent it to the full Senate for a vote next week. If the bill gains approval from the Senate, the state Assembly and the governor, its passage would have the effect of nullifying Amazon’s current drive to qualify a referendum for the June 2012 budget.

To recap the situation thus far: A law requiring online retailers with California affiliates to collect sales tax went into effect on July 1. Amazon immediately dropped its affiliates in California, and on July 8 the company filed a petition to put a referendum to repeal the law on the ballot, for California voters to decide on. The petition was approved, and since then Amazon has been campaigning to collect the 505,000 signatures needed to put the referendum on the ballot.

And  now it seems that supporters of California’s legislation have made the latest move. According to the LA Times, “Passage of a new law would supersede the old law, making the referendum invalid.”

Apparently the new bill raises the small seller exception—where the previous law exempted online retailers with less than $500,000 in annual remote sales from collecting sales tax, the new one raises that threshold to $1 million. That change was enough to get a certain online auction company to drop its opposition to the law, so legislators are more optimistic about its chances.

Believe it our not, this latest escalation of the small seller exception is as dramatic as it is surprising. The economic impact of this change will be significant, however the lawmakers in Sacramento seem to have glossed over that fact:

…add an urgency clause, and increase the small business exemption from $500,000 to $1 million. Staff notes that BOE does not track micro-level data on affiliates that may be subject to the exemption, so the fiscal impact related to increasing the threshold in indeterminable. (emphasis added)

Are they serious? They think it’s indeterminable? Affiliates have nothing to do with the revenue collection, it’s the retailers that collect, not the affiliates. This statement is pure misdirection. I expect Ms. Betty Yee and quite a few analysts at the Board of Equalization would dispute that they could not calculate the loss of revenue, and the legislature should immediately review some of their recent findings on the subject (like this and this).

This amendment blatantly discriminates against small local main street retailers who are not afforded any such exception—proper tax policy should treat all retailers and taxpayers equally. Surely there are a few local retailers who would love to not have to collect the sales tax on their first $1 million in sales. For a bit of perspective on this matter, let’s listen to Amazon’s own Mr. Paul Misener in his testimony before the United States House of Representatives in 2006

To be sure, no one expects truly small businesses to do the work of sales tax collection alone but that doesn’t mean they shouldn’t be required to do it at all. By analogy we require small business persons to sign their legal documents in ink but we don’t expect them to make their own ballpoint pens.

Amazon.com will offer sales tax collection services to our small seller customers. I am sure that our on-line competitors also can and will. Of course, this discussion so far as been limited to small businesses conducting interstate sales. What about small main street businesses selling locally? Even after a decade of e-commerce, as Brian [Bieron of eBay] has pointed out, still over 90 percent of retail sales are off line.

Small main street businesses already collect sales tax and, thus, have both the administrative burden of tax collection and the higher prices caused by it. If out of state small businesses would not have to collect, then their main street brethren would be saddled with a competitive disadvantage both as to burden and price. Hopefully policy makers never would conclude that this disparity would be fair to main street small businesses. (emphasis added)

We couldn’t agree more.

We continue to believe that all this contentiousness is unnecessary. Energy would be better spent on federal legislation on online sales tax collection—which Amazon and lawmakers support. It solves many other problems, too. To quote from ourselves:

As states such as California and Illinois enact affiliate nexus legislation (so-called Amazon tax laws) to attempt to collect sales tax due on online purchases, small businesses across the country are being caught in the crossfire. Affiliate marketers are forced to either find entirely new sources of revenue or flee to another state. Meanwhile, online retailers that rely on affiliate marketing are forced to either eliminate their established sales and marketing teams or come into compliance with the new laws.

The better solution is the anticipated Main Street Fairness Act, which incorporates the Streamlined Sales and Use Tax Agreement (SSUTA). SSUTA streamlines and simplifies state sales tax regulations, making it easy for retailers to collect sales tax for multiple states. SSUTA is the cooperative effort of 44 states (including California and Illinois), businesses, political leaders, and industry associations. States that adopt SSUTA have committed to make sales tax collection easier for all retailers, online and offline, large and small.

We hope that the Main Street Fairness Act will soon make these state battles moot. It’s the best solution for all.


Senator Bob Corker (R-TN) voices support for online sales tax collection

August 26, 2011

According to an article in the Nashville Business Journal, Senator Bob Corker (R-TN) has voiced support for the online collection of sales tax:

U.S. Sen. Bob Corker signaled Wednesday that he’d support a federal policy to make online retailers collect sales taxes, calling it “patently unfair” that companies like Amazon.com don’t have to while brick-and-mortar businesses do. . . .

Corker on Wednesday stopped short of outright saying he was ready to support a proposal to force the collection of sales tax by online retailers nationally. He said he’s studying a legislative proposal by Sen. Dick Durbin, D-Ill., that is still changing, and Corker noted that consumers already are supposed to contribute sales taxes for online purchases but typically don’t.

In a recent blog post, we talked about the (false) perception that online sales tax collection is a partisan issue—in fact, we’re seeing more Republican politicians speak out in favor of online sales tax collection every day. Which isn’t surprising at all. The online collection of sales tax is a bipartisan issue of tax fairness; it doesn’t involve raising taxes or creating a new tax, and it does involve making sure our Main Street retailers are able to compete with online retailers on a level playing field.

We applaud Senator Corker for speaking out in favor of online sales tax collection, and we look forward to seeing more and more Republican lawmakers join him.


Editorial: Florida (and the country) needs online sales tax collection

August 26, 2011

We were thrilled to see this editorial from the Tallahassee Democrat (reprinted on the News-Press.com website), which makes one of the strongest, most cogent arguments for online sales tax collection that we’ve ever read. We urge you to read the entire editorial, but here’s part of it:

State Rep. Michelle Rehwinkel Vasilinda reminds – or attempts to remind – her tax-resistant colleagues in the Florida Legislature that collecting a sales tax on purchases made online is not the same as raising taxes.

Raising money, yes, but as Rehwinkel Vasilinda put it at the end of last session, “The concept of leaving tax revenue on the table, especially when we really need it, is really irksome.”

Taxes should be collected on purchases from online merchants, the same as purchases in brick-and-mortar shops, which suffer from this not-so-level playing field of commerce. Business groups such as Associated Industries of Florida and the Florida Retail Federation would like to see the disparity addressed.

It’s not just the tax avoidance that’s a problem for local merchants. In many cases local stores end up functioning as a showroom for online shoppers who like to look at the merchandise in person, but buy it online where there’s no sales tax.

But because online sales cross state boundaries and tax rates vary so much nationwide, a meaningful online sales tax would be most effectively and uniformly collected under federal legislation.

This clear-sighted editorial ends with an endorsement of both the Main Street Fairness Act and the Streamlined Sales and Use Tax Agreement (SSUTA). SSUTA was created by forty-four states and the business community to simplify sales tax collection and make it easier for businesses to collect sales tax. The Main Street Fairness Act would allow states that have adopted SSUTA’s guidelines to require all retailers, whether in-state or out-of-state, to collect sales tax on purchases made by state residents.

Last spring, Rehwinkel Vasilinda, D-Tallahassee, sponsored HB 455 to have Florida join the agreement, and Sen. Evelyn Lynn, R-Daytona Beach, sponsored the companion SB 1548. Neither moved forward, though perhaps now, with this umbrella effort in Congress gathering steam, Florida lawmakers will join the 23 states that have joined the coalition.

Roughly 1,400 retailers already collect sales tax in those “streamlined” states on a voluntary basis.

They’ve remitted more than $700 million to their respective states, yet estimates are that the actual amount lost could be as much as $23 billion by 2012.

This legislation is overdue in Congress, and the collection of this tax is critical to Florida, which needs to join the future and work to close this unfair tax loophole here.

To those who have said that online sales tax collection is not a bipartisan issue: Note that the measure to have Florida join SSUTA was introduced in the Florida Senate by a Republican and in the House by a Democrat.

In an article on another Florida website, Matthew Falconer, who is running for mayor of Orange County (FL), also points out that the Main Street Fairness Act is a bipartisan issue and offers a way to combat the false perception that it increases taxes:

Not surprisingly there is support for the bill on a state level by Republicans and Democrats alike. Even Jeb Bush supports some type of internet sales tax. There are complications to the collection procedures but the technology exists to address those problems. The obstacle to the internet sales tax collection problem is political. It is seen as a tax increase which is taboo for Republicans.

The easy solution to that problem, again supported by Jeb Bush, is to reduce taxes by the same amount of the increased revenue from internet sales tax collection. This does not create additional taxes but levels the playing field between brick and mortar stores, the ones that employee our neighbors, and on line retailers (many of which are based in other countries).

Other politicians have also suggested that if sales tax were collected online, other taxes could be eliminated. As we blogged about recently, Indiana State Senator Luke Kenley and West Virginia delegate John Doyle have said that if online retailers collected sales tax for their states, the inheritance tax or the groceries tax (respectively) could be eliminated.

We have long said that online sales tax collection is a bipartisan issue, one that should matter to anyone who cares about fairness and tax equality. We’re glad to see that politicians on both sides of the aisle agree.


Facts on Main Street Fairness Act and Streamlined Sales Tax, including job figures

August 24, 2011

We recommend our readers take a look at two sources of thorough backgrounds on the Main Street Fairness Act, the Streamlined Sales and Use Tax Agreement, and online sales tax collection in general.

A fact sheet issued by the International Council of Shopping Centers is worth reading in its entirety, but we were particularly interested in some of the statistics it includes, which we hadn’t seen before:

  • One of out every 11 U.S. jobs is shopping center-related; for every 100 individuals directly employed at regional shopping centers, an additional 20 – 30 are supported in the community due to multiplier effects
  • Each $1 million of new retail sales adds 3.61 jobs. To illustrate: 
    • $1 million in new sales at Best Buy’s average e-commerce and B&M shares is expected to create 3.47 jobs;
    • The same $1 million in new sales at Amazon’s average is expected to create 0.88 jobs.

Again, it’s definitely worth reading the entire fact sheet. The simple bulleted arrangement is surprisingly effective, and with each fact, the implicit argument for the Main Street Fairness Act becomes stronger and stronger.

The other piece is an article by Sylvia Dion at allBusiness (we blogged about an earlier article of hers on the Main Street Fairness Act). This time she focuses on the Streamlined Sales and Use Tax Agreement (SSUTA) and how it works in the Main Street Fairness Act. Unlike any other article we’ve seen on the subject, this one discusses SSUTA’s small seller exception:

One definition, not elaborated on in the legislation, but found in the SSUTA, is the small seller exception. Cory Barwick, Lead Tax Analyst at CCH -a Wolters-Kluwer business, explains that the SSUTA’s small seller exception “allows businesses with less than $500,000 in annual revenue to be exempt from the remote (out-of-state) seller collection requirement.” According to Barwick, who reports on Streamlined Sales Tax developments for SalesTaxSupport.com, “the Streamlined Sales Tax Governing Board has made many revisions to the SSUTA since its inception in an effort to entice states to become members to the agreement, including the November 2010 update to the small seller exception,” which he adds, “makes sense as these businesses are the ones that generally cannot afford the expense associated with the collection of remote taxes.”

Of course, we feel that collecting sales tax online shouldn’t cost businesses anything, which is why we’ve made TaxCloud free to all retailers. But if small businesses are concerned about the potential costs of online sales tax collection, the small seller exception should put them at ease.

Dion also makes it clear that the Main Street Fairness Act is not a nationwide “Amazon tax”:

By the way, although the proposed Main Street Fairness legislation and the state “Amazon laws” have a similar goal—to require the collection of sales tax by out-of-state sellers who do not have a physical presence in their statethe Main Street legislation is not a national “Amazon law.”  These state laws are presumptive nexus laws, meaning that if a business engages in the activity described in the law, a presumption of “nexus” arises. Nexus, an oft overused term, means that a business has established a sufficient connection to a state to allow that state to subject the business to taxation or, in the case of sales tax, to impose a sales tax collection requirement. State “Amazon laws” focus on an expanded view of nexusin essence, that the use of in-state “affiliates” who post a web-link to the out-of-state seller’s on-line store is akin to creating a physical presence in the state.
But the Main Street Fairness legislation makes no mention of nexus. What’s key here is that states must be full-member SSUTA states in order to have the right to assert a collection requirement on out-of-state sellers. Essentially, the use of in-state “affiliates” that refer customers to an out-of-state seller via a web-link becomes irrelevant under the Main Street legislation.

In other words, under the Main Street Fairness Act, there would be no need for retailers like Amazon and O.co (formerly Overstock.com) to drop their affiliates—no need for states to pass sales tax laws focused on affiliates in the first place.

We have to disagree with Dion on one subject, though. At the end of the article, she asserts that the Main Street Fairness Act doesn’t have bipartisan support. We disagree. While the official sponsors of the bill are Democrats, numerous Republican politicians have voiced their support for this legislation—among them, Senator John Boozman, Tennessee Governor Bill Haslam, and Indiana State Senator Luke Kenley. There is absolutely nothing partisan about the Main Street Fairness Act—it doesn’t create a new tax or raise taxes; it simply ensures all retailers follow the same sales tax rules; and it gives states complete control over their own sales tax laws—and we believe that we’ll see more and more Republicans voicing support for the bill in the days to come.


Main Street Fairness Act could mean elimination of inheritance tax, says IN lawmaker

August 24, 2011

Indiana State Senator Luke Kenley, chairman of Indiana’s Senate Committee on Appropriations and president of the Streamlined Sales Tax Governing Board, last week issued a statement urging Indiana’s congressional delegation to support the Main Street Fairness Act, which was introduced on July 29 by Senator Dick Durbin. He suggested that should the bill pass, Indiana could eliminate the state’s inheritance tax:

Kenley (R-Noblesville) also said he hopes state lawmakers would agree to use the nearly $200 million in additional revenue the state would receive from the passage of the federal legislation to eliminate Indiana’s inheritance tax and reduces others . . . .

“Hoosier bricks-and-mortar businesses are at competitive disadvantages with online retailers who often do not collect sales taxes on Internet purchases, costing our state as much as $200 million annually,” Kenley said. “Though consumers are required to report and pay a ‘use tax’ on Internet purchases when they file their taxes each year, many unknowingly fail to do so, costing Indiana and other states substantial revenue—an estimated $11.4 billion nationwide each year.”

Kenley isn’t the first to suggest that improving the collection of sales tax could allow states to cut other taxes. As we blogged about a few months ago, West Virginia delegate John Doyle has said that if online retailers regularly collected West Virginia sales tax, the state might be able to end its tax on groceries.

Kenley also pointed out that the Main Street Fairness Act will benefit Indiana retailers as well as the state’s schools and other essential services:

A 1992 U.S. Supreme Court ruling, known as the Quill decision, determined retailers are not required to collect sales taxes in states where they do not have physical locations unless mandated by Congress. As a result, many consumers visit a store to compare or test products, but then make their purchases online—often avoiding payment of sales taxes, Kenley said.

If enacted, the Main Street Fairness Act would create a uniform sales-tax collection system ensuring all businesses—both online and brick-and-mortar retailerscollect uniform sales tax for purchases. The act would also relieve consumers of the legal burden to report to state tax departments the required sales tax they owe for online purchases.

“I am asking our congressional delegation to support a modern, streamlined, pro-business initiative that will help our thousands of retailers who are being discriminated against under the current policy,” Kenley said. “This is not a new tax but one that is already owed and not being collected. With sales tax serving as Indiana’s largest source of revenue, our K-12 schools, higher education institutions, public safety and other essential state services are hit the hardest by the current system. It’s time we level the playing field for our local businesses and remove this unfair burden from Hoosier consumers.”

We applaud Senator Kenley for making his support for the Main Street Fairness Act known to his state’s DC representatives. The legislation is hugely important for states, since it gives them the ability to determine for themselves how (and whether) online sales tax should be collected for the state. But since it’s federal legislation that will be enacted (or not) by Congress, state lawmakers need to make sure their representatives in DC know just how important the bill is for them.

We hope other state lawmakers will follow Senator Kenley’s lead and contact their state’s representatives in Congress to let them know that they support the Main Street Fairness Act.