Sales tax “shouldn’t become a wedge that favors some retailers over others”

March 30, 2011

This terrific article by St. Louis Post-Dispatch columnist Bill Nicklaus offers a great summary of the debate over online sales tax and explores where the debate may go in the future.

We found this section particularly interesting:

Convenience and selection are the biggest reasons for the growth of e-commerce, but the tax-free shopping environment doesn’t hurt. One study, done by two Georgia State University professors in 2003, estimated that collecting sales taxes would reduce online purchases by 6 percent.

If that’s accurate, then traditional retailers are already losing some business because of the disparate tax treatment. They’ll lose more as e-commerce continues to grow.

It’s great to see a study confirm what we’ve long known from anecdotal evidence: although most consumers shop online for convenience and selection, some consumers shop online specifically to avoid paying sales tax, which means those are sales that would otherwise go to local retailers.

Among the other hot topics Nicklaus covers are Illinois’ recent enactment of affiliate nexus legislation and the $269 million bill that Texas recently sent to Amazon for uncollected sales tax.

Nicklaus notes that Senator Dick Durbin (D-IL) is about to introduce the Main Street Fairness Act in Congress because “he wants a federal version of Illinois’ Amazon tax, making it harder for online firms to play one state against another.” (A quick note of clarification: The column mentions that Illinois’ new tax law is called the Main Street Fairness Act. The federal legislation is also called the Main Street Fairness Act, but unlike Illinois’ law, it would allow all states to require online retailers to collect sales tax.)

Nicklaus closes with a strong endorsement of federal legislation and an equally strong condemnation of Amazon’s tactics: “The sales tax has long been viewed as an efficient and fair way of raising government revenue. It shouldn’t become a wedge that favors some retailers over others. If states can’t stand up to Amazon on their own, then Congress must find a way to end the bullying.” (emphasis added)


Wired: “Amazon spars with states over taxes”

March 18, 2011
WIRED: Amazon Spars With States Over Taxes

WIRED: Amazon Spars With States Over Taxes

Wow, it has been a busy 24 hours in the news cycle for us!

Just a few hours ago, Sam Gustin of Wired magazine, a forum known for its technologically sophisticated editorial staff and readership, published an article that is clearly supportive of Amazon’s fight with the affiliate nexus laws being enacted across the country. The article mentions the Streamlined Sales Tax effort, but then it quotes David Brunari, executive editor of Tax Analysts, as saying that Streamlined has “been going on for 10 years and they’re no closer today than they were five years ago to making this work.

This is an odd and somewhat unexpected statement from the Tax Analysts group, who are no strangers to this topic. About a year ago Tax Analysts hosted a debate at the National Press Club on this exact topic (we attended and blogged about it at the time). They also published at that time a very thoughtful article on affiliate nexus laws, written by Cara Griffith, then the legal editor for TaxAnalysts’s weekly journal, State Tax Notes (she has since moved on to become a manager with PriceWaterhouseCoopers LLP).

In Ms. Griffith’s article, she argues that “Amazon tax” laws are ultimately damaging to the Streamlined Sales Tax efforts. The greatest cause for concern, she said, is that the growing number of state affiliate nexus laws may mislead federal legislators into believing that affiliate nexus laws are a more viable option than Streamlined.

We hope Wired will continue to track and report on this important story, and hopefully we will have the good fortune of briefing their editorial staff on this matter soon. Naturally, we posted a comment on the Wired article, too.


NPR covers the Main Street Fairness Act

March 17, 2011
NPR

States Try To Collect Online Retail Sales Tax

With last week’s passage of affiliate nexus legislation in Illinois making headlines, Robert Siegel of NPR’s “All Things Considered” interviewed Forbes executive editor Janet Novack about online sales tax.

Ms. Novak has written about this subject extensively; in fact, we’ve blogged about an article of hers in the past. In her NPR interview, she provides a clear, concise, and accessible description of the problems facing states and the logical position Amazon has taken—that “Congress [needs to] to pass a national law that requires collection by everyone […] but in the interim, we’re not going to disadvantage ourselves by collecting.”

You can listen to the interview (4 minutes, 15 seconds) or read a transcript of it here. As always, we welcome your comments.


“Amazon’s multi-state sales tax battles are a sideshow to the real national solution…”

March 11, 2011

This article by Curt Woodward, senior editor of Xconomy Seattle, points out that the best long-term solution to the problem of uncollected sales tax is for states to join the Streamlined Sales Tax effort and for the federal government to enact legislation such as the Main Street Fairness Act.

The volley of lawsuits, rhetoric from fired-up tax collectors, and Amazon’s hardball response tactics are certainly entertaining to watch from afar. But any real resolution will almost certainly come from a much more boring, slow-moving effort to get state sales taxes on a common source code, and then change the federal laws.

The article goes on to highlight Washington State’s efforts on behalf of the Streamlined Sales and Use Tax Agreement (SSUTA). In fact, it was Washington’s decision to join SSUTA that spurred FedTax’s founders to create TaxCloud, our free, easy-to-use tax calculation and remittance service.

TaxCloud is the only service designed specifically to comply with SSUTA at a scale that supports all online retailers. TaxCloud is easy for retailers to integrate with their current systems—from sign-up to tax collection takes just 20 minutes.


Affiliate nexus law enacted in Illinois

March 11, 2011
Wall Street Journal: Amazon Takes Action in Illinois as War on Sales Taxes Continues

Wall Street Journal: Amazon Takes Action in Illinois as War on Sales Taxes Continues

Today’s decision by Illinois governor Pat Quinn to sign HB 3659, affiliate nexus legislation, confirms that states are willing to try anything to narrow the budget gaps they face. The drawbacks to such legislation are well-known: loss of income for affiliates and the potential for extensive litigation (as New York has been experiencing for the past three years).

Amazon has already announced its decision to cancel its relationships with Illinois affiliates, as reported in this Wall Street Journal article. Other online retailers are expected to follow suit.

The bright spot for Illinois-based affiliates is that other large retailers—those who already collect sales tax online due to their brick-and-mortar presence—have offered to step in. Barnes & Noble, Wal-Mart, Best Buy, and Sears are among the retailers that have reached out to Illinois affiliates. Also, the Stand with Main Street organization has begun a new “matchmaking” service to pair affiliate marketers that have been dropped by Amazon with other retailers.

We hope Illinois will soon join its neighboring states and join the Streamlined Sales and Use Tax Agreement (SSUTA). Illinois senator Dick Durbin is expected to introduce the Main Street Fairness Act in Congress any day now. Once enacted, that law will enable SSUTA states to require online retailers to collect the sales tax that is already due on all online purchases.


Senator Durbin expresses support for collecting sales tax on internet sales

January 21, 2011

According to this article in the Naperville Sun, Senator Dick Durbin is ready to co-sponsor a bill to address the issue of uncollected sales tax on internet purchases. The article states that at a recent meeting between Durbin and Illinois business people, there was a common interest in working on a uniform tax for internet sales, which owners of traditional brick-and-mortar stores said would level the playing field between their businesses and online competitors.

The article quotes Senator Durbin as saying, “I cannot understand how people can buy so many things over the Internet and have them shipped to Naperville, Illinois, and use your streets, your police, your traffic lights, your fire protection, your curbs and gutters, without paying a penny in sales tax to the city of Naperville.” Illinois, he said, is losing between $150 million and $1 billion in sales tax revenue on out-of-state Internet sales. “You are losing so much revenue in this process that should be coming back to the community.”

The article did not mention the Main Street Fairness Act, but it would be most efficient for Senator Durbin to pick up the ball on this bill, which was introduced into the House last year but was not voted upon. The senator’s public statements on the issue caps off a week of support and discussion at the city, state, and federal levels, as we have been covering here on the FedTax.net blog.


Chicago Tribune Article Gets it Right

November 10, 2010

Yesterday’s article in the Chicago Tribune by Columnist Eric Zorn covers all the issues related to sales tax collection by internet merchants.  The article starts by highlighting a local retailer who has been steadily losing business on price to internet retailers.  Mr. Zorn goes on to explain the finer points of use tax reporting and remittance (even helpfully including links to the tax forms that need to be completed for out-of-state sales), and goes on to say that use tax collection “…has a low compliance rate…[f]ewer than 5,000 taxpayers filed ST-44s in fiscal 2010, according to the revenue department, leaving an estimated $163 million in online Illinois sales taxes unpaid.”

The article wraps up with a discussion of why Internet companies have escaped sales tax collection thus far (Quill and Bellas Hess Supreme Court decisions) and why that view is outdated: “It wasn’t a particularly urgent question when the Web was young and e-tailers argued successfully that taxing Internet purchases would strangle the baby of e-commerce in its crib.  But now that e-commerce is an obstreperous adolescent, conventional small businesses are gasping for air and cash-strapped states are eyeing all this lost revenue hungrily.”

Good points, great article, thanks Mr. Zorn.