Time to Tax Online Sales
Commentary by Bill Bittner, President, BWH Consulting
According to a report in The Wall Street Journal, 18 states have joined together in an effort to remove the basis for the 1992 Supreme Court decision to not require online
retailer to collect sales taxes.
The Supreme Court ruled for the exemption because it recognized the hardship it would be placing on retailers trying to keep track of all the various sales tax laws. These 18
states have agreed to harmonize their sales taxes so that it is no longer such a challenge for retailers to comply. The hope is that, by making compliance easier, the states will
begin to receive this additional revenue.
It is a brief introduction, but there are a lot of angles to this story. The first is whether the Supreme Court rationale even applies in 2005 with current Internet capabilities.
One of the consumer’s rationales for paying shipping charges on online purchases has been the sales tax savings. Will required tax collections combined with increased shipping
costs due to fuel prices have an impact on online sales?
The progress of Service Oriented Architecture (SOA) for the support of shared services over the Internet has made it extremely easy for companies to have access to each other’s
data files. There is no reason why a central database of tax status based on UPC (GTIN) and political jurisdiction could not be accessible to all online retailers.
The consumer perspective is more interesting. The addition of sales taxes and increased delivery costs could have an affect on the consumer’s decision to buy online. Combine
this with need to accept remote support verses the services of their local retailer and it opens up a chink in the online armor for brick and mortar operators to exploit.
Moderator’s Comment: Is the Supreme Court’s rationale for allowing online sales to go untaxed still valid with the advances made in online technology
since 1992? Will required tax collections combined with increased shipping costs due to fuel prices have an impact on online sales? –
Bill Bittner – Moderator