The Debate on Internet Sales Taxes

I should point out here at the beginning that I didn’t set out after college to become a jewelry writer.

I’ve never owned, operated, or worked in a jewelry store; I didn’t grow up in or around the industry; and I began my service at JCK as a humble sales assistant who had no idea how connected the jewelry world actually was.

However, I do know a few things about news. And as someone who helps pump out this website’s daily newsletter, I can tell you right now that—even in slow times—the jewelry industry does not lack for news. Whether it’s a crime story, a lawsuit between rival manufacturers, a sparkling new line, or tips on how jewelers can revolutionize their stores, the news that the jewelry community generates is often colorful, controversial, spirited, engaging, and just plain fun.

Every Saturday, this blog will give you more insights into the top jewelry-related stories of the week. I’ll include comments from the news stories that generate the most debate, analysis from industry leaders, as well as fun stuff like videos, questions from readers, and my own take on the events shaping the jewelry industry.

So enough about me—you came here for some news.

Web and Taxes

Since we ran a story about Congress introducing a National Internet Sales Tax Bill in August, the issue of Internet sales tax has generated quite a bit of feedback.

Commenter Pamela supported the bill, saying that as “a small business that does a lot online,” she didn’t want to be “forced out of business because I drowned in ‘paperwork’ that is different from state to state.”

Redrobin2 suggested that a flat tax might be the best approach. “That would avoid the possibility of shoppers cherry picking purchases in certain states,” the commenter said, “And make sure that companies stay where they are instead of moving to places with lower tax rates.”

In the November issue of JCK, two retailers debated both sides of the debate on Internet sales taxes.

“The threat of having an Internet sales tax will stifle online innovation for small independents,” said Sean Dunn, vice president J.R. Dunn Jewelers in Lighthouse Point, Fla. Daniel Moyer, owner of Moyer Fine Jewelers in Carmel, Ind., countered: “If one group of retailers doesn’t pay tax, that missing revenue has to come from somebody, somewhere else.”

JCK senior editor Rob Bates posted a story at the beginning of this week about a mall owner that is suing Indiana “over the state’s failure to collect sales tax from e-commerce giant Amazon.” Most of the comments so far seem to be behind the owner’s efforts. “Well, it is about time that the Internet play on a level field,” said commenter @royaldiadem (who added on its Twitter feed: yesssss!), in response to the article. 

Mike Derby, operations manager of the retail jewelry consulting firm Focus Business Management Institute, tells me that should an Internet tax be passed, it would benefit local independent business by eliminating the 5–10 percent instant pricing advantage that the Internet retailers currently have over the local businesses. “Obviously, we are huge proponents of benefitting the small independent retailer, so it would appear that an Internet sales tax would be beneficial,” he says.

“When you consider that local jewelry stores have to pay 8½ percent or more, this represents an unfair advantage for Internet merchants,” says Marc Knobloch, vice president of Aron Knobloch Inc. “This is a large percentage of the profit to overcome by jewelry stores who are obligated by law to pay the taxes.” 

Adds Jeff Josephson, owner and president of Raymond Lee Jewelers, “If one group of retailers have to pay tax, then e-tailers need to fall into the same category.”

In my opinion, everyone is still figuring out the best way to make the Internet a profitable and level playing field, so the fact that there is such a passionate debate is a good thing. This is how real progress is made, and I hope a fair solution is the result. Considering our current economic situation, we need more debate on issues like this, not less. I’m encouraged by the spirited comments we’ve generated thus far, so keep them coming (just play nice, that’s all we ask).

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