A Fair Solution for all Business Models
As a major online retailer specializing in clothing, footwear and gear for working people around the world with online customers on five continents and in-store customers in a Midwestern brick-and-mortar storefront, Working Person’s Store understands first-hand the arguments for and against e-commerce taxation and tax collection.
While the explosion of internet retail sales over the last decade has brought this issue to the forefront, whether to collect taxes on interstate retail sales has its roots in pre-Internet catalog sales and has been discussed and argued for at least the last 45 years. In 1967, the U.S. Supreme Court discussed the burdens that the multiplicity of rules, regulations, rates, and recordkeeping across state lines would place on retailers. Then in 1992, with the explosion of online retailing, the U.S. Supreme Court addressed online retail sales tax collection head on and determined that the collection of sales tax was only required in states where an online business also had a physical presence.
Much has changed since 1992.
First of all, most states already have laws requiring the payment of sales tax on all purchases, including online sales. Enforcement with respect to online sales, however, is difficult since states are unable to track online sales and consumers are merely asked to report their purchases on yearly income tax returns.
In addition, just as online sales have grown phenomenally in the years since 1992, technology has also changed dramatically. Even ten years ago, collecting taxes for multiple states would have been a nightmare for businesses. Today, the technology is available to make this task much simpler and cost-effective for retailers as long as the sales tax rates are clearly defined and easy to understand. We collect sales tax in California and Illinois currently and we can attest that there is a huge learning curve. Technology can only get us so far if the rule base is going to be unique to each state, county, city, tax district, etc.
And importantly, the MFA does not merely require online businesses to collect sales tax. Before a state is authorized to require businesses to collect taxes on catalog and online sales, the state must simplify its tax laws and streamline the process of multistate tax collection for businesses and that seems to be the point of difficulty. This requirement for simplification and the establishment of uniform processes makes the MFA more equitable and more workable for all businesses.
It is possible for the smallest of retailers to have an online presence. In today’s market, it is an increasing surprise not to find local retailers online, from a boutique jewelry design shop to businesses like Working Person’s Store, passionately committed to both its brick-and-mortar store and its global online presence.
Healthy competition fosters good business. Superior quality and fanatical customer service should determine the success of both online and brick-and-mortar operations. Neither business model should seek to increase its bottom line by offering consumers a way to avoid payment of legitimate taxes. In short, e-commerce is how we do business today and the way we will continue to do business tomorrow. As both retailers and consumers, it’s time to put fairness first.