David Kirkpatrick

April 27, 2009

Online sales taxes?

Filed under: Business, Politics — Tags: , , , — David Kirkpatrick @ 4:51 pm

Looks like they are coming. Too many taxing jurisdictions are losing revenue.

Of course placing a brand new tax burden on a still-growing retail sector and hitting consumers directly in the wallet sounds pretty counterproductive in a severe economic downturn. A downturn that has no horizon at the moment.

Hopefully most e-tailers can find workarounds for the coming spate of governmental overreach.

From the link:

States and local governments hope sales taxes would help them recoup part of the revenue lost amid a recession that has diminished property values and crimped demand for items sold in stores. In the fourth quarter, state sales tax collections dropped 4%, the steepest decline in 50 years, according to the Nelson A. Rockefeller Institute of Government. Online sales taxes could help states generate at least $52 billion in added revenue over the next six years, according to an Apr. 13 study conducted by three University of Tennessee professors. Requiring virtual stores to collect taxes, even in parts of the country where they don’t have physical operations, would also place e-tailers on a more even footing with brick-and-mortar stores such as Wal-Mart (WMT), which collect sales taxes on in-store as well as online purchases.

Companies that sell products over the Internet say the taxes would hamper growth. “The introduction and passage of an Internet tax bill would have adverse effects on e-commerce,” George Askew, an analyst at Stifel Nicolaus , wrote in a recent note. After New York’s law was passed, Overstock.com says it had to terminate agreements with some 3,400 Web sites that once promoted the closeout retailer in the Empire State.

Overstock ceased operating in New York altogether, says the company’s president, Jonathan E. Johnson III. After losing a court battle seeking to repeal the law, Overstock plans to file an appeal in the coming weeks, Johnson says. “These states are signing up for a lawsuit, or for businesses to pull out of their states,” he says.

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