Hit in the Gut by the Internet Sales Tax
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The Fiscal Times
August 23, 2013

The Internet sales tax is hitting consumers like me in the gut – literally.

As someone interested in keeping my weight down (who isn’t), I order a supply of low-calorie pre-packaged meals from a food-and-lifestyle website – and have it delivered each month without so much as a keystroke if there’s no change to my existing order.

The company is based in Maryland, but that’s been irrelevant. The convenience of receiving the order at home in New York without thinking about how far the food travels has been hard to beat.

RELATED:  STATES EYE $11 BILLION WINDFALL FROM ONLINE SALES TAX

The tax-free aspect of the thing wasn’t bad, either.

But maybe it was all too good to be true. Recently this polite but scary note hit my in-box – and by the way, when companies are this polite in an email you know it’s not good news:

“We wanted to take this opportunity to let you know that we will begin collecting and remitting sales and use taxes on all Internet sales where applicable as of September 1, 2013. The sales tax will be visible during checkout as part of the overall breakdown...

“Our decision to join other major Internet sellers in the collection of and remittance of sales and use taxes is in response to the growing instances of states legislatures and revenue agencies seeking the enforcement of Internet sales tax. We expect to see more measures enacted aimed at enforcement of sales and use tax collection.

“If you have any questions, please call us. Thank you.”

RELATED:  ARE YOU READY FOR THESE NEW STATE TAXES?

I do have questions – but calling the company won’t solve them. In most states across the nation, the days of shopping online and getting away with it in terms of paying sales taxes are coming to a close.

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This has been gathering steam for some time, of course. Last year legislation was introduced in both houses of Congress to force Internet retailers to collect local and state sales taxes. Proponents of the Marketplace Fairness Act have maintained that it will, at long last, put brick-and-mortar stores on an equal footing with their online competition.

But states, too, have been eyeing the tremendous windfalls the Internet sales tax will bring. They’ve been losing billions in sales tax revenue to Internet companies – and since sales taxes make up about one-third of all state tax revenue in the states that do have sales taxes, according to Lucy Dadayan of the Nelson A. Rockefeller Institute of Government, this is a big hit due to “consumer spending shifts toward lightly taxed services and the difficulty of collecting taxes on Internet-related transactions,” as Dadayan told Stateline/PEW.

RELATED:  10 WORST STATES IN THE U.S. FOR TAXES

Still, here’s a question for American consumers: Do we really need another new tax when we engage in a transaction? Is the Marketplace Fairness Act really going to help spur economic growth – or put the breaks on it even more?

In about a week’s time, I have a decision to make: Do I keep getting the food I enjoy and pay more for the same exact thing?

Or do I give it up and buy something else? But then, what? And from where? And what sort of tax would I pay on that?

Since I can’t get my food in a retail outlet (not yet, anyway), what would I replace it with?

Either way, here is what’s clear: Chatter like this is probably not what Internet retailers really want to hear.

Managing Editor Maureen Mackey oversees scheduling and work flow and also writes and edits features and reports on a wide array of subjects. She spent more than 20 years as a senior book and features editor at Reader’s Digest.