Online Sales Tax Controversy

Online Sales Tax

States want Congress to require internet retailers to collect their sales taxes. Today, only companies that have a physical presence in the state are required to collect that specific state’s sales taxes for online purchases. Online shopping is attracting consumers for many reasons, primarily convenience and competitive prices from low overhead companies. State legislators are continuing to push for online sales tax collection laws because of lobbying by the likes of Wal-Mart, Target and other big box retailers. Their argument is in lost revenue and business because, unlike true internet retailers, they have a physical address so their customers are subject to sales tax.

No Online Sales Tax

Will An Online Sales Tax Increase Revenue?

The brick and mortar retailers are lobbying state legislators arguing tax revenue will dramatically increase if an online sales tax is passed. In reality many states are finding that as soon as they pass an online sales tax law, the online retailers move and they take all their revenue and jobs with them. They simply move across the border to a more business-friendly state. More than just companies leaving, entire states are being passed over due to sales tax laws. In fact, Amazon chose to open their new 850-employee distribution center in Delaware because there is no sales tax.

Sales Taxes-Online Sales Tax

Taxing The Businesses Away

For example, when Illinois enacted an online sales tax collection law, Overstock affiliate CouponCabin, moved to Indiana to enjoy the more tax-friendly climate. FatWallet, another Overstock affiliate previously based in Illinois, set up shop in Wisconsin upon passage of the Illinois sales tax law. When Illinois passed their version of an online sales tax they lost jobs and revenue at the same time. It isn’t good policy to create a negative business climate within a state, all the large businesses will move away. Businesses will always choose states and or countries that offer low tax rates or tax incentives over one that does not. Consumers will continue to go online and to low-tax states as local sales taxes and charges rise. In New Hampshire, where there is no sales tax, you will find shopping malls full of consumers along it’s border with Massachusetts that has a 7% sales tax.

Will An Online Sales Tax Pass?

Florida and Massachusetts are the only two states that have tried to expand their sales tax laws to cover most services and products purchase. The sales tax laws were immediately repealed by both states after a tax rebellion and no state has dared try since, says Ronald Alt, head of research at the Federation of Tax Administrators. “Legislators don’t want to sit in the barber chair and get an earful on the new haircut sales tax,” Alt said.

States With No Sales Tax

There are only five states without sale tax. The states without sales tax are Alaska, Delaware, Montana, New Hampshire, and our home, Oregon. We are an internet marketing company located in Portland, Oregon. Unlike other online internet marketing companies, you do not have to pay any taxes when using our services.

States Without Sales Tax  & Online Sales Taxes

Conclusions – My Thoughts

Any sales tax, online or offline, will motivate businesses and consumers to go elsewhere to save money. If a national online sales tax law is ever passes, I believe we will see a consumer and corporate outcry. Taxes are bad for business and the economy no matter how you look at it. In a time when Americans are tightening their belts, an online sales tax is the last thing anyone wants or needs. My question is, why are we trying to raise taxes when the real problem is frivolous spending. Our combined national debt is over 16 TRILLION and is only getting bigger. Most of Americans live on a budget, so I think it’s time our government does the same.

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