RSR Research: Is it Time to Tax Internet Sales?
By Brian Kilcourse,
Through a special arrangement, presented
here for discussion is a summary of a current article from Retail
Paradox, Retail Systems Research’s weekly analysis on emerging issues
On Sunday June 7, the San
Francisco Chronicle published an editorial to say that it’s high
time to tax retail sales on the internet. What
gave rise to this opinion is the fact that California is "broke,
busted, and disgusted," and needs money. With internet sales
approaching 4 percent of total retail sales in the U.S., the e-channel
is no longer just a technical curiosity – it is now a fact of retail
Illinois, Tennessee, and Hawaii are also considering the issue now. Last
week, the following news item appeared in the Honolulu Advertiser:
have sent Gov. Linda Lingle two approaches to get Mainland retailers to
collect and pay taxes on sales from Hawaii. One bill would allow Hawai’i
to join 23 other states in the Streamlined Sales Tax Project to simplify
state tax laws and encourage retailers like Amazon.com to collect and pay
state sales and use taxes. States that have signed up for the project are
unable to require retailers to pay the taxes, however, until Congress passes
federal legislation clarifying it is not a burden on interstate commerce.
The second bill would immediately require Mainland retailers to pay the
state’s general-excise tax if they have an economic nexus in the Islands
through a presence on local Web sites. Local Web sites can get paid commissions
for referring customers to Mainland retailers through links. States are
losing out this year on nearly $7 billion — $36.6 million in Hawai’i —
in uncollected taxes on Internet commerce, according to a study by researchers
at the University of Tennessee."
Given the condition
of the U.S. and states’ economies and the loss of tax revenues during this
recession, the momentum is building across the country to address this
issue. Whether the U.S. Congress will deal with it is an entirely different
matter. As long ago as 2001 (when internet sales only represented about
1.5 percent of total retail sales), 40 State Governors sent a letter to
Congress asking that a 1998 moratorium on internet sales
tax be lifted. But in October 2007, the House of Representatives voted
405-2 to pass the Internet Tax Freedom Act Amendments Act, extending the
moratorium on internet access taxes and other
taxes unique to the internet until November 2011.
RSR on June 23 ran a "quick
take" poll to see what our readers think about the prospect of an
Internet Sales Tax (the results are in the chart below).
Safe to say, colonial
Boston’s Rev. Jonathan Mayhew’s 1750 call for "no taxation without
representation" still rings in many Americans’ ears! The most interesting
data point from this survey is that not one of the 54 people who answered
the question had "no opinion."
Twice as many respondents were adamantly opposed to the new tax as those
who were in favor of it. If our readers are any indication, this issue is
bound to polarize the voting public.
Discussion Questions: Is it time for U.S.
states to tax internet purchases? What’s the
likelihood that such legislation will get passed in today’s economic
climate? What impact would taxes have on e-commerce?
- Internet Sales Tax: If It Were
Up To You – RSR Research
- Is it Time to Tax Internet Sales?
– RSR Research