On the Internet and Sales Tax

I am a little surprised that two of my fellow jewelry industry bloggers – an elite but growing crew – are somewhat skeptical about Congressman Charles Rangel’s talk at the JA show, where he supported Internet retailers charging sales tax. 

I should first say that, for purely selfish reasons, part of me doesn’t want an Internet sales tax. I do a good deal of my shopping online, and am more than happy to save the tax (8 ½% in New York.) And yes, I would probably shop more at brick and mortar stores if I had to pay the same sales tax online. 

But thinking about it, I can’t see any logical reason why a brick and mortar store should have to charge sales tax, while the guy selling the exact same product online from his apartment down the street should not. Barry at Diamondvues argues that, even with both parties charging the same tax, “Internet prices will still be lower,” because of differences in overhead and all the rest. True enough, but that is due to the free market. It is another thing for the government to make it cheaper to shop one way and not another. Why should our government favor one sales channel over all others? That is the essence of an unfair, discriminatory government policy.  

This is a particularly important issue for jewelers. Many engagement ring shoppers are young and budget-conscious. On a several thousand dollar purchase, 8 ½% sales tax is a substantial amount of money. It is worth buying jewelry online for that reason alone.  As I’ve written, B and M retailers may be able to “earn” the extra amount they charge by “adding value,” but that is harder to do when the difference in price isn’t going in their pockets, but the government’s.

 

Charging Internet sales tax will not solve all of traditional retailers’ challenges regarding e-commerce, all of which Barry and Shanu summarize very well. But at least it won’t put them at a government-mandated disadvantage.

I should note that, JCK columnist Frank Dallahan, no tax fan, agrees. (And here’s counter-arguments from the Direct Marketing Association.) Feel free to comment on this issue below, although, please remember, this is not a political blog, so try and stay on the subject at hand …

JCK News Director