Friday, March 23, 2012

Online Retail Sales Tax Is Coming Quickly

State budgets have relied on sales tax as a means to pay the bills.  But as online retailing has become more and more prevalent, sales tax revenue declines.  States are feeling the effects while consumers have been enjoying the savings.  And as price conscious shoppers, savings of 7 or 8% on big ticket items can be huge.

Brick and mortar retailers feel the impact of online; shoppers taste and test the merchandise in the store, then go to the web to purchase without paying the extra sales tax amount.  "A common misconception among Connecticut consumers, lawmakers say, is that Internet transactions are exempt from sales tax. If retailers don't collect and remit the tax back to Revenue Services, consumers are supposed to report and pay it themselves through their annual state income tax filing."  Yet I doubt few people know the law and fewer actually comply by it in Connecticut or other states that have the same rules.

For Amazon and others, a required sales tax would bring total costs of their merchandise closer to their brick and mortar counterparts.  With a narrower price gap, consumers may prefer buying at a store to assure immediate delivery as opposed to waiting a few days for a package to be shipped.  The larger the savings, the longer, I suppose, a consumer is willing to wait.  But state after state are imposing rules requiring collection of sales tax regardless of a physical presence in the state.  And that is exactly the ruling from the Connecticut courts.  So enjoy those savings today for they will surely go away.

1 comment:

  1. I live in WA and have to pay sales tax on most Amazon purchases, but still shop at Amazon simply because they still have a price advantage over Brick & Mortar stores on certain items. There's also the convenience of just quickly loading up Amazon and ordering something when I'm thinking of it during lunch instead of having to drive to the store, find the item, wait in line to pay.