Sales Tax, Meet the Internet

Jul 5 2009, 1:05pm CDT | by Robert Evans

The Internet is an invention constantly in flux. We need to be careful to not get too used to it as it is now, because it's not going to last that way very long. Right now we live in an age where online retailers can get away without most of their sales being taxed. This is because they're only obliged to do so in states where they have a physical presence.

This is a state of affairs that can not last. States are fed up at not getting their cut of the sale, and traditional retailers are jealous at the profit margins of companies like Amazon.com. These are the seeds of disagreement that will soon blossom into the dandelions of war. The first shots of the coming conflict have already been fired.

One of the most egregious loopholes in our tax system used to be the fact that independent companies were allowed to sell their wares through online mega-retailers without having to deal with taxes either. In 2008, the state of New York closed this loophole in their area. Big online retailers have to pay sales tax to New York on any sales made by NY-based companies. Hawaii, North Carolina, and Rhode Island all followed suite shortly thereafter.

Some online retailers (Amazon, Overstock) fired back by refusing to let NY-based companies sell through their sites. Doing so doesn't require a huge sacrifice from them now, but as more states enact similar laws their losses will grow more and more. Amazon and their compatriots know that they'll have to comply one day soon, but they're going to drag out the wait until that day as long as possible.

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Robert Evans
The excitement about new smartphones, tablets and anything mobile drive Robert to unearth the latest rumors and developments in this fast moving space. He adopted 4G as soon as it become available and knows where the mobile market is going.
Robert can be contacted directly at robert@i4u.com.