Online Sales Taxes – Yikes!

Aren’t we all used to clicking on the shopping cart icon, checking out online, and not seeing any sales tax collected on most retail websites? I wonder how much I’ve saved on sales tax over the years on my online purchases. However, the cost of online shopping likely just increased. This week the U.S. Supreme Court ruled that a state can now collect sales tax on online purchases in their state. Some online retailers, like Amazon, already collect sales tax, so if you are an Amazon junkie like me, maybe this doesn’t concern you too much. But other online retailers, like eBay, Overstock.com, and Etsy don’t collect taxes and they may take a temporary hit until consumers figure out what they want to do. In fact, the stock of almost all online retailers is down after the court’s ruling.

Consumers have become so dependent on online shopping. I doubt there will be any real impact on shopping habits. Who really wants to get in their car, drive to a store, and walk around in a store looking for something that can be found with the click of a mouse? While sitting down, drinking a hot brew from the Keurig bought online. We can even shop online in the rain without getting drenched, right? Why go to all that hassle? Unless you are a teenager wanting to meet girls or boys at the mall, why go there?

As a bankruptcy lawyer, I see daily reports of retailers filing Chapter 11, most of which end up liquidating their assets. Toys R Us, Claire’s, Bon-Ton Stores, Nine West, and Winn-Dixie are a few of the many stores that filed bankruptcy in 2018, all citing plunging sales due to less foot traffic in their stores. Consumers didn’t decide to stop shopping, they simply changed their shopping habits and now shop online. Shopping online is way too convenient, so I doubt a few more pennies or dollars in taxes will dissuade consumers from shopping any other way. Congress is likely counting on this and will probably take no action to regulate taxing online purchases.

Since 1992, states could only collect sales tax if the seller had a physical presence in that state, a store, for example. Today, if you are a small business selling and shipping items all over the country, how will you determine the state’s tax, collect that tax, and then forward the taxes to that state? That sounds like a nightmare for a small business not equipped for that administrative burden. Should Congress take legislative action to change this? Until they do, will your online shopping strategy change? I’m guessing not as we rely heavily on the ease of home shopping on Amazon and other online retailers.

Posted in: Consumer, Uncategorized