The Sales Tax Man Cometh!

The Sales Tax Man Cometh!

Jason Yang
Jan 11, 2012

Another one bites the dust! Starting in 2014, Indiana joins California and a small handful of other states and will begin collecting sales tax on Amazon purchases. The rule of thumb has generally been that if an online store has a local presence in your state, then they have to charge sales tax for online purchases as well. But is it fair? Weigh in with your opinions as we discuss the points and counterpoints.

Online legal website NOLO explains the current rules:

If an online retailer has a physical presence in a particular state, such as a store, business office, or warehouse, it must collect sales tax from customers in that state. If a business does not have a physical presence in a state, it is not required to collect sales tax for sales into that state. This rule is derived from a 1992 Supreme Court decision which held that mail-order merchants did not need to collect sales taxes for sales into states where they did not have a physical presence.

It's interesting to note that while vice president for global public policy Paul Misner publicly stated that they supported sales tax collections for all online companies, Amazon is the only online company required to do so with this recent deal. Lobbying continues for Congress to pass federal measures.

Is it fair for brick and mortar stores to pass on the additional cost of a state sales tax while consumers buying online get to skip the fees? It has been argued that state sales taxes go towards things like roads and maintenance which are necessary to get to local stores, so why should online stores have to contribute to local infrastructure?

If you consider how many people research online and then go to their local store to check out a product hands on, it might seem an even split where the purchase is actually made. But price is price, and if a widget costs X at one place and X + 6% elsewhere, then the average shopper likely isn't thinking about the long term consequences of their immediate savings.

Is it fair for online companies to have an advantage of lower prices? It's a business advantage that doesn't seem quite fair. They already aren't having to pay the overhead expenses of your local store. Having only recently experienced an increase in sales tax in our native state of Maryland, we have to consider if sales tax were collected on online purchases then perhaps we might not have seen the increase. With local sales being pushed online, states are seeing less and less funds coming in. So while we'd like to save a buck or two, in the long term it just makes sense to charge sales tax for online purchases. Watch for it, in a few years we'll all be paying sales tax for every purchase we make - online or offline.

Read more:
Will You Still Shop Amazon when they Charge Sales Tax?
Amazon: Sales Tax Requirements
Indiana officials reach deal with Amazon, • Sales Tax on the Internet

(Images: Frank Boston/Shutterstock, Arkady/Shutterstock)

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