Submitted by KARA HAAS
In recent years online shopping has become an unspoken tax haven. It seems as though it is similar to offshore bank accounts for the rich, but this dealing with unpaid sales tax.
It is only when I decided to venture out to the stores during Florida’s “Back to School Sales Tax Holiday” that I felt the full effect of this marketing pull. The thought of a discount equivalent to the local sales tax seemed to generate quite the crowd. It caused me to check my surroundings, for fear that I was back in grade school assembled in the gymnasium.
It is time to close this loophole for states, and stop the perceived discount customers receive based on their shopping channel.
A little recap, for those who are unfamiliar with general state sales tax laws and the current debate:
Sales tax is not a new tax. Currently, if you, the consumer, purchase an item subject to sales tax at your local store; the retailer collects and remits sales tax on your behalf. If you purchase that item from an online retailer that does not have physical presence in your state, and that retailer does not collect and remit sales tax on your behalf; you are responsible for remitting it to the state as use tax. Yes, there is a tax form where taxpayers can be forthcoming and report their own sales tax. Do not believe me? Take a moment to search “ ‘your state’ individual sales tax remittance form.”
There are some retailers, direct marketers, mail order catalogs and others that oppose the current move to allow states to require these channels to collect and remit sales tax. For those businesses that argue, “We will become unpaid tax collectors for the states.” I ask, do you have W2 employees? You collect and remit payroll taxes and do not receive compensation. Additionally, more than half of the states offer collection allowances to compensate businesses for acting as a sales tax collector and I would suspect other states to consider it in the future.
For those arguing that your business does not utilize any of the particular state’s infrastructure or services, may I remind you; this is not your tax. This is a tax that you are collecting and remitting on behalf of your customers that do use the services local tax dollars support.
As a business, if your only competitive advantage rests in not collecting a tax that is legally due, I would imagine that your business is on life support. Competing only on the ability to offer a discount equivalent to sales tax is effectively operating an offshore account, at the expense of your consumers. While consumers think that they are saving; they are effectively evading paying the tax, taking business from the local economy, and depriving the local community of services that state sales and use taxes provide.
As technology evolves, businesses are able to improve how they compete. States are also able to improve how they enforce laws. Do you really want to be known as the retailer who forces your customers to submit their own taxes? How competitive will you be and how popular will you be when states learn that your customers are easy audit targets? The number of solid, software companies that have the products to offer assistance calculating, collecting and remitting at an affordable rate is growing. Investing in human and/or technological capital to meet this requirement is no different than other costs of doing business. Every channel has its particular costs of doing business. In eCommerce, there are the costs of Internet, website design and hosting, and freight. Brick and mortar stores often have fixtures, utilities, and higher rent. Both channels need to have the proper balance of capital invested in accounting and compliance relative to the market they serve.
It is time to return to competing on fundamentals of quality, service, price, value and engaging consumers, rather than offering a tax haven. Offer value to your customers, not an offshore shopping cart.
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Thanks to Kara Haas for her submission. Kara Haas is a CPA dedicated to helping multistore retailers make the most of their inventory, accounting and technology in Florida. She mainly speaks in 140 characters at a time @greenposgirl.
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