June 16, 2012

IT'S CONSUMPTION, TAX IT:

It's time to strike down the 'Amazon exemption' (Becky Quick, 3/27/12, Fortune)

It's the dirty not-so-little secret of online and catalogue shopping: Buy from a retailer that doesn't have a physical presence in your home state, and you avoid state and local taxes on your goods at the time of purchase. Technically, if I buy Mass Effect from Amazon (AMZN), I'm required to send my $4.20 to New Jersey's coffers on my own. Yeah, right. Plenty of people don't even realize they're supposed to be sending that money in -- I didn't before I wrote this column. (Amazon collects taxes in only five of the 50 states.) Ask any tax expert or economist what percentage of these taxes is ever collected from consumers, and he will tell you it's virtually zero.

It's a great bargain for shoppers but a huge, unfair advantage for the online retailers, which have been beating up their brick-and-mortar counterparts for years. And it's a double whammy for state tax coffers: Not only do the online retailers not collect sales taxes on what they sell, but they are helping put chains like Borders and Circuit City out of business, shutting off what was once a spigot for state and local revenue.

This brawl over the collection of local taxes has been brewing for more than a decade, but it matters now more than ever. Online sales are expected to total about $226 billion this year and soar to $327 billion by 2016. States and municipalities are losing out on about $25 billion a year in uncollected tax revenue, the National Retail Federation estimates.

Posted by at June 16, 2012 7:39 AM
  

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