SCOTUS to decide on internet sales tax
It’s difficult to tell how much revenue is being lost locally.
Merchants across Rome and Floyd County, and the rest of the country for that matter, are awaiting action from the U.S. Supreme Court, which heard arguments last week in a case that has been simmering for decades: Should companies that do business online be forced to collect sales taxes based on sales directed to states where they do not have a brick and mortar location.
Rome Floyd Chamber President Al Hodge said the Chamber supports a level playing field for all retailers. Hodge said many of the Chamber members have expressed concern that online retailers that do not charge local sales taxes have an unfair advantage.
There is no clear-cut data that can detail how much money is at stake. The Government Accounting Office estimates between $8 billion and $13 billion is available if all states and local taxing authorities had the authorization to collect sales tax from all remote sellers.
Bruce Jones, a professor of economics at Georgia Highlands College, said the latest figure he’s seen puts online sales at between 9 and 10 percent of all retail sales across the nation.
It’s not only about the money, says Stephanie Harvey, owner of exit343design in Conshohocken, Pennsylvania. There are more than 10,000 sales tax jurisdictions in the United States: 45 states, the District of Columbia, counties and municipalities.
“Adding this sales tax isn’t just about the tax itself — it’s about the cost of time to navigate and file (taxes) or the additional expense of hiring someone to do so on behalf of the business,” said Harvey, whose design and printing company has an online store and sells merchandise to other retailers.
“Fortunately there is software that can help determine accuracy of the amount in each jurisdiction,” Hodge said. “If a company can figure out how to send a product around the world, to large cities and remote areas alike, they can also find out what the accurate tax is at the local level.”
“They’ve got your zip code so it’s not impossible for them to figure out what they should be charging, just put it in a database and collect it,” said Jones.
Susan Horton, co-owner of The Stitchery, 9 Central Plaza in Rome, said her shop does offer internet sales but suspects that less than 1 percent of the company’s business is generated online. She couldn’t even guess how much of that was out-ofstate. She said the cost of purchasing expensive software to collect sales taxes on any sales that were generated to out-ofstate customers would be burdensome and not costeffective for her small business.
Jones said he suspects online sales will continue to grow exponentially. “The younger a person is the more likely they are to buy things online,” Jones said. “It’s so convenient and there are places in Georgia that the only way you can buy from them is online.”
The professor said the growth of online sales is enough of a worry to the large retailers that most of them are developing hybrid systems where customers can make a purchase online and either ship it directly to the customer or to the local store where the customer can come in and pick it up.
Should the Supreme Court side with local governmental leaders who claim they are losing big bucks in uncollected taxes, lots of smaller companies will be forced to start collecting taxes on out-of-state sales.
If they rule the other way, will retailers who are collecting taxes now cease to do so? That would give quantifiable numbers to the locals who right now are not able to even put a solid guess on how much money they’re losing.
The case heard last week was brought by online giants Wayfair, Overstock.com and Newegg challenging a South Dakota law enacted last May requiring out-of-state retailers that have sales of more than $100,000, or over 200 transactions a year in the state, to collect sales tax.
The prevailing law is centered around a 1992 decision, Quill v. North Dakota, when the court ruled that companies cannot be forced to collect sales tax from customers in a state where they don’t have a physical presence like a store or distribution center.
Rome attorney Andy Davis, who played a lead role in a successful court case that required online hotel room brokers to remit hotel/motel taxes, said he believes it is only fair for the online retailers who are selling the same items as the mom and pop stores on Broad Street to be forced to collect the same local taxes. Since the online hotel decision was rendered, Rome has been receiving an average of close to $6,500 annually in additional hotel/motel taxes.
Davis also said he believes there is some legitimacy to the argument that local communities deserve to get the tax revenue, because it’s the local communications network that facilitated the sale in the first place and local road infrastructure that allows the items to be delivered to the end customer.
Whichever direction the court opts to go, and a decision is expected by the end of June, there is no question the ruling will have an impact all over the country. While there is disagreement over how much money is at stake, the Government Accounting Office reports that 45 states and Washington, D.C., have sales tax programs in place.
Of the 45 states that levy sales taxes, 37 have laws on the books that allow additional local sales taxes that support county and municipal governments and school systems.