Tulsa World: Avoiding taxes on Web could end soon

MAKE US YOUR HOMEPAGE | Wednesday, February 10, 2010 | WIRELESS

Home > Business

Newspaper View Print this story

Comment

RSS

Bookmark

Avoiding taxes on Web could end soon
Online taxes one way to fill coffers.

An employee at Amazon.com grabs boxes to be loaded onto a truck on Dec. 1 at the company's warehouse in Fernley, Nev. States are increasingly seeking to collect taxes from online retail sales as a way to fill gaps in budgets.

By RACHEL METZ Associated Press
Published: 1/18/2009 2:25 AM
Last Modified: 1/18/2009 3:01 AM

NEW YORK — Shopping online can be a way to find bargains while steering clear of crowds — and sales taxes.

But those tax breaks are starting to erode. The amount of money at stake nationwide is unclear; online sales were expected to make up about 8 percent of all retail sales in 2008 and total $204 billion, according to Forrester Research. This is up from $175 billion in 2007.

Based on that 2008 figure, Forrester analyst Sucharita Mulpuru says her rough estimate is that if Web retailers had to collect taxes on all sales to consumers, it could generate $3 billion in new revenue for governments.

Collecting online sales taxes is not as simple as it might sound. A nationwide Internet business faces thousands of tax-collecting jurisdictions — states, counties and cities — and tangled rules about how various products are taxed.

And a 1992 U.S. Supreme Court ruling said that states can't force businesses to collect sales taxes unless the businesses have operations in that state. The court also said Congress could lift the ban.

As a result, generally only businesses with a "physical presence" in a state — such as a store or office building — collect sales tax on products sent to buyers in the same state.

That doesn't mean products purchased online from out-of-state companies are necessarily tax-free. Consumers are usually supposed to self-report taxes on these items. This is called a use tax, but not surprisingly, it tends to go unreported.

In hopes of unraveling the complex tax rules — and bringing states more money — 22 states including Oklahoma and many brick-and-mortar retailers support the efforts of a group called the Streamlined Sales Tax Governing Board. The group is getting states to simplify and make uniform their many tax rates and rules, in exchange for a crack at taxing online sales.

In response, more than 1,100 retailers have registered with the streamlining group and are collecting sales taxes on items shipped to states that are part of the agreement — even if they are not legally obligated to.

The streamlining board also is lobbying Congress to let the participating states do what the Supreme Court ruling banned: They could force businesses to collect taxes on sales made to in-state customers, even if the businesses don't have a physical presence there.

States supporting streamline effort

Oklahoma is one of 22 states participating in the Streamlined Sales Tax Project, an effort to simplify the nationwide patchwork of tax rates. In exchange, some retailers will collect online sales taxes in those states even if the companies have no operations located there. Eventually, if Congress goes along, the states could be allowed to force businesses that don’t have a physical presence there to collect sales taxes.

Other states whose tax laws meet the standards of the streamlining group: Arkansas, Indiana, Iowa, Kansas, Kentucky, Michigan, Minnesota, Nebraska, Nevada, New Jersey, North Carolina, North Dakota, Rhode Island, South Dakota, Vermont, Washington, West Virginia and Wyoming.

Three states support the project but have yet to fully adjust their tax laws or have those changes take effect: Ohio, Tennessee and Utah.

By RACHEL METZ Associated Press

Newspaper View Print this story

Comment

RSS

Bookmark

Reader Comments

Show: Most Recent Comment First

Add your comment

2 comments have been made on this story so far. Tell us what you think below!

Reporting Comments

If you see a comment that violates our terms and conditions, please help us by clicking the "Report this Comment" link next to a comment. That will alert the web staff to review the comment. Thank you. -- Web Editor Jason Collington

Report Comment

Mar, Tulsa (1/18/2009 10:46:51 AM)

That really blows. If a sales tax has to be paid by buyers online, sales will drop off. After all when a buyer purchases merchandise online they usually have to pay shipping. When a buyer purchases merchandise in a brick & mortar store they have to pay sales tax. With adding sales tax to the online buyer, it will make it unfair for the sellers online as their customers would have to pay sales tax AND shipping.

Also, as stated in the article, it would be very difficult to set up a FAIR system of sales tax, since different states, cities and counties vary on their tax system. I've heard talk about paying sales tax online since the mid to late 1990's, nothing has been done yet. I can't see any fair way to implement an online sales tax.

Report Comment

zzx375, BA (1/18/2009 7:19:17 PM)

Never leave any tax opportunity on the table.

Add Your Comment
In order to post a comment on this article, you must sign in to Tulsaworld.com. If you do not have a site account, you can create an account for free.