Is Sales Tax Fairness Fair?



“The threat of having an Internet sales tax will stifle online innovation for small independents.”
Sean Dunn, vice president
J.R. Dunn Jewelers
Lighthouse Point, Fla.

Compete or Get Beat: In the 1990s, when Internet businesses emerged as the competition, retail jewelers like me were scared. How could we compete with stores that didn’t have the same expenses and overhead? But we knew that we had to join the fight against this new competitor, so we adapted and innovated early on with an e-commerce website. Retail jewelers that changed their business models early on are being punished today with the proposal of repealing no Internet sales tax. In the whole fair-tax discussion, I don’t see this as being very fair.

The Paper Chase: Collecting taxes in complying with state tax codes is hugely ­burdensome for independent retailers that already have an online shopping cart. The logistics involved in chasing down every dollar their customers spend online would no longer be cost-efficient for smaller mom-and-pop stores.

Chain Reaction: Those who are against no sales tax should pay closer attention to their direct competitors—namely, big-box retailers. They’re getting around sales taxes by forming separate entities of their online divisions. It makes more sense to address this unfair practice than to [tax] every company that does business online.

“If one group of retailers doesn’t pay tax, that missing revenue has to come from somebody, somewhere else.”
Daniel Moyer, owner
Moyer Fine Jewelers
Carmel, Ind.

Unfair Online Advantage: Pure players such as Blue Nile are based in Seattle and can sell sales tax–free in roughly 45 states depending on state tax codes. If you take an average bridal sale that ranges from $5,000 to $7,000, and multiply that by a 6.5 percent sales tax, for example, you’re looking at a $325 to $455 advantage the out-of-state online retailer has over a local brick-and-mortar store. For a bridal customer on a budget—and that’s a lot of them—that tax savings is pretty significant. And it will most likely be a tipping-point issue in favor of the online retailer.

Proof Positive: Amazon has closed facilities in states like California and moved to no-Internet-sales-tax states like Indiana, building its fourth distribution center here. [That] proves what a huge advantage this is for online retailers.

Old Laws, New Tricks: [These] laws were passed in the early ’90s to create a “hands-off policy on the Internet and cyberspace to foster economic growth,” to quote the Clinton administration. Back then they didn’t have the technology to track online purchases the way they do now. We need to change old laws that are more in keeping with the huge number of online merchants there are now.