The following updates have been brought to my attention by the ICSC Global Public Policy Newsletter.
Amazon, which obviously opposes any kind of tax on internet sales, as it should for its own interests, has announced that it will open a new warehouse in Delaware, as opposed to New Jersey, purportedly in response despite a well-publicized effort in New Jersey to attract a distribution center for Amazon.com Inc.. As reported by ICSC, in January, State Senator Raymond Lesniak co-sponsored a bill that would require online companies like Amazon to collect sales taxes in New Jersey if they maintain a distribution center, office or other corporate physical presence in the state. It should come as no surprise that such a bill would discourage internet warehouses and distribution centers in New Jersey. This bill was introduced in an effort to level the playing field between Internet sellers and the state's brick-and-mortar stores after it was discovered that Amazon is seeking a 22-month sales tax holiday before investing $65 million to build a fulfillment center in the state.
This issue bears repeating. New Jersey, like most other states, does impose a tax, often referred to as a Use Tax, which imposes the reporting and the payment of the tax on the consumer. The tax is very similar to a sales tax collected by the brick & mortar stores. The difference is that the sales tax is enforced against the retailer and in the case of the use tax, it is enforced against the consumer. As a practical matter, a use tax is usually very difficult to enforce unless the item purchased is a type that requires registration in the state, such as an automobile.
Taxing internet sales in the form of a sales tax as compared to a use tax, would give states greater enforceability, presumably allowing each state to enforce its own tax on sales shipped to residents within its jurisdictional border and enforcing the tax on the internet seller, wherever the seller is located.
As further reported by ICSC, the new bill drew attention to the New Jersey's sales tax policies and propelled the fairness issue higher in the conscious of the public and legislators. As I have stated previously, I think that it is a mistake to promote internet sales tax on the basis of "fairness." Proponents of an internet sales tax need to convince the public and their legislators that the public will benefit much more from such a tax than a state would from the increased employment resulting from a warehouse within the state. Without a significant overriding benefit to the state and state residents, taxing the internet will not be a popular action. I suspect that most people would prefer the advantage of buying online and effectively avoiding any sales tax that they would have been obligated to pay if the bought at a local brick & mortar.
Somewhat related to my suggestion of a sales tax moratorium on brick & mortar sales in conjunction with requiring taxation of internet sales, several states are introducing bills in state legislatures for sales tax holidays.
- The Colorado House Finance Committee ,released the "back-to-school" sales tax holiday bill. This bill would create a sales and use tax holiday for "back-to-school" items for three days in the beginning of August for a period of five years beginning in 2012.
- In Florida, a school supply sales tax holiday bill, was passed by the full House which would create a sales and use tax holiday for the sale of clothing, wallets, and bags under $75 and school supplies under $15.
- In Virginia, a sales tax holiday bill for hurricane preparedness equipment and energy efficient products, was reported out of the Senate Finance Committee unanimously.
In my opinion, these sales tax moratoriums don't go far enough and should be conditioned upon the brick & mortar retailers hiring more employees. To get fairness, you've got to contribute something and increased employment will be the key to success.
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