COMMENTARY | Sales tax is a big way for states to raise a lot of money, but some states believe they are being short changed by Internet shoppers. According to the Pittsburgh Post-Gazette, Pennsylvania estimates its loss at $380 million and Ohio at $400 million. However, the days of shoppers picking up deals virtually tax-free on the Internet could be over. Legislation is moving forward in the U.S. Senate that would allow states to force Internet retailers to collect and pay sales tax
The move comes as a result of Supreme Court decision that allows a business to avoid collecting sales tax if that business has no physical presence in a particular state. California has been wrestling with Amazon over the definition of “physical presence,” but has struck a deal with the huge Internet retailer. The burden of paying sales tax rests solely on the consumer.
Some states allow residents to voluntarily report Internet and other out-of-state purchases, which nets the states a bit of money but nowhere near the amounts estimated. Pennsylvania expects to voluntarily collect around $5 or $6 million from residents.
Not surprisingly, traditional retailers with actual stores are in favor of having virtual retailers charge sales tax. Wal-Mart, Best Buy, and Home Depot feel they are at a competitive disadvantage with retailers who can offer the same items but free of any tax payments, making the Internet a cheaper place to make a purchase.
Consumers would be the big losers in new legislation, but they would actually be following the law instead of working around it. The situation is strange because may folks are unaware that if a retailer does not charge tax, they are responsible for paying it. Whether or not the figures are as large as states believe they are remains to be seen.
Consumers have been battered by high fuel prices, rising food costs, and one bad economical report after another, and now we are going to be on the hook for something (that is rightfully our burden to bear) that Internet companies do not exactly publicize.