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March 29th, 2011, 01:22 PM #1Death of an E-Salesman
This is a good summary of what is going on with the state's attempt to gain sales taxes in trying to force e-tailers to collect taxes.
By ERIKA MORPHY
States and municipalities desperate for additional tax revenue are turning with more than just a little prodding from bricks-and-mortar retailers to etailers for help. And by help I mean conscription in their tax collection operations. Full Article:
A starker example is provided by Vadim Korytny, owner of three web businesses, one of which, www.justminisplits.com, sells ductless air conditioners. If such a regulation was to go into effect his profits would suffer greatly, he tells me.
The average sale on this site ranges from $700 to about $1200 per customer. Some customers order as much as $5000 worth of inventory at a time. With, say, an order is for $1,000 a sales tax would be around $70. Now I can tell you that I do not have a $500 mark up on these units. I also already offer free shipping. So my choices will be to absorb the cost of taxes or pass them on to the customers.
The latter is impossible, though, he goes on to say. I get countless calls a day just asking about if the price online includes taxes. When I say we do not charge taxes unless you are from New Jersey, they almost always buy.
Another indicator how sensitive clients are to price, he says: We used to charge for shipping separately and one day we decided to include free shipping while keeping the prices the same. Our business exploded because of it. People like all inclusive prices and free things. People do go online to get better deals.
March 29th, 2011, 02:16 PM #2
Nice article Chuck. An added kicker I read today about Illinois pushing for federal regulation, so sites like Amazon can't just drop affiliates from certain states rather than pay the taxes... If states can't stand up to big retailers on their own, and brick and mortar retail have been lobbying for a more level playing fields for years, the feds may see motivation to get more interested:
With Amazon pulling out all the stops in its fight against taxes, do the states really have a chance? They do if the federal government gets involved.
Sen. Dick Durbin, D-Ill., says he wants a federal version of Illinois' Amazon tax, making it harder for online firms to play one state against another. Past Congresses have shown no appetite for this fight, but the retail lobby's growing interest in the issue may change that.
March 29th, 2011, 02:18 PM #3
Unfortunately what Korytny is saying is just the rationale and ammunition that states use to promote their tax initiatives. Korytny is competing with in state B&M stores and by not having to add sales tax they argue he has an unfair advantage. This is NOT the type of argument affiliate marketers need to make in response to affiliate tax issues - it is counter-productive.
Our arguments must be 1) The result of individual states passing affiliate tax bills is merchants dropping affiliates causing not increased but rather decreased tax revenue; and 2) The only fair sales tax system would be a national sales tax on internet purchases where every state receives a fair revenue stream and where all online merchants regardless of whether or not they have affiliates, and regardless of their location or their affiliates' location collect sales tax based on a uniform rate.
March 29th, 2011, 02:26 PM #4
Last edited by I.M.O.G.; March 29th, 2011 at 02:26 PM. Reason: spelling
March 29th, 2011, 02:29 PM #5
Re I.M.O.G.'s post:
For there to be a uniform national internet sales tax, three or four separate things have to happen:
1. Every state has to agree to vacate its own sales tax system as far as internet sales is concerned. The Federal government may or may not be able to add a national tax, but it has no power to vacate the sales tax laws of individual states. Without the agreement of each state, a national tax would be an additional tax, not a substitute tax;
2) There must be a significant change in the political make-up of Congress. Republicans will never support this tax; there would have to be a significant Democratic majority (no Blue Dogs) in both the House and Senate to ever pass a national internet sales tax;
3) Both houses and the President would have to understand the need for a uniform tax and then get it done;
4) The trickiest issues is the Constitutionality of such a tax and the big question is as to whether or not the Federal government has authority to pass such a tax. As with income tax, it may well require a Constitutional Amendment, and that would take many years and the likelihood of passage would be highly questionable.
March 29th, 2011, 02:31 PM #6
Chuck, Mods, shouldn't this thread be in the Affiliate Tax forum?
March 29th, 2011, 03:50 PM #7
Its fine here where it gets more attention although you may want to put a pointer there to this thread.
I agree with AffiliateHound that this is a federal problem and in this time of budget deficits and surprised that there isn't a rudimentary bill proposed. I agree that this is a constitutional issue and that may be keeping the bill makers out of it. Perhaps we need to see enough states pass the nexus law before DC will take notice.
March 29th, 2011, 11:22 PM #8
And I totally agree with your points above. This is NOT the argument we need to be making. It's not about avoiding sales taxes or gaining an unfair advantage over local merchants. It's about the unfair impact that legislation has on affiliates, while still not forcing merchants to collect sales tax. And also the constitutionality of it.
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