Group finds support for taxing internet sales
A large majority of Americans support paying sales tax for online purchases at the point of sale, a new report says.
A national survey found 86 percent of respondents agree it would be "far easier" to pay sales tax for online purchases when the purchase is made rather than reporting and paying the tax themselves. But those surveyed were divided when it came to the effort by Congress to require all remote retailers to collect sales tax at the point of purchase, with 56 percent in favor of the pending legislation.
The state of South Dakota requires all residents to report and pay sales tax on any non-exempt purchase that did not include it at the time of the sale. The tax is paid through a form sent by the purchaser to the state Department of Revenue.
The survey was conducted between May 3 and 6 by the Opinion Research Corp. on behalf of the International Council of Shopping Centers. It polled 1,007 adults -- 503 men and 504 women -- nationwide via telephone interviews.
"The results of this study demonstrate that consumers are aware of our outdated sales tax system," said ICSC president and CEO Michael Kercheval in a news release.
The survey found 61 percent of those polled in states with a sales tax understand they are required to pay any uncollected sales taxes from online purchases.
A 1992 U.S. Supreme Court decision forbids states from directly collecting sales taxes from any business with no physical presence inside their borders.
"When they shop online, (consumers) do not want the hassle of having to save all receipts, calculate the appropriate tax due and file it directly with the state," said Betsy Laird, senior vice president of global public policy for ICSC, in a news release.
The ICSC is a New York-based trade association for the shopping center industry. It has more than 55,000 members in more than 90 countries.
Two state laws enacted in March 2011 attempt to address the issue. One requires any non-exempt retailer who sells "tangible personal property, services or products transferred electronically" from outside the state and is not already required to collect sales taxes in South Dakota to post a notice on its website or catalog explaining South Dakota's sales tax law. The law does not impose a penalty on retailers that fail to provide the notice. The other expands South Dakota's nexus -- the term applied to businesses considered to have a physical presence in a state and therefore required to collect and remit sales taxes -- to include companies affiliated with a state retailer, in a controlled group with a state retailer, or that have a contractual relationship with a state retailer.
Federal legislation introduced last summer would, if passed, give states the authority to collect state and local sales taxes from large Internet and mail-order retailers. The pieces of legislation, known as the Marketplace Fairness Act and Marketplace Equity Act, are strongly supported by the ICSC, according to the organization's report.
The legislation would require states to adopt the Streamlined Sales and Use Tax Agreement, which requires states to abide by specific product definitions, follow uniform requirements for filing sales tax returns, run both state and local collection services from a single state office, and allow retailers to register through a multistate registration system. South Dakota is among the 24 states that have already implemented the SSUTA on their own.
South Dakota loses an estimated $48 million annually in unpaid online sales taxes, said Jane Page, assistant director of the Business Tax Division of the state Department of Revenue. The source of her estimate is a study performed at the University of Tennessee, she said.
"We've been waiting a long time for federal legislation," Page said. "States are looking at it as tax owed to the state already."
Although South Dakota does not track how much is received in online sales taxes submitted by residents using the form provided by the Department of Revenue, Page said the department receives several submissions each week, although often for small amounts.
Questions have been raised about the numbers presented in the University of Tennessee study. Bill McClellan, director of government affairs for the Electronic Retailing Association, argued although the numbers alarmed state governments when first released, they have since been revised to reflect changes in the remote retail market, and still don't wholly reflect the true situation.
"It's my firm belief that there is not the pot of gold that the states think there is out there," McClellan said.
He also argued ICSC's claim that 86 percent of survey-takers agreed it would be easier to pay sales tax for online purchases when the purchase is made was misleading, as it neglected to address the constitutional and legislative questions at the heart of the debate over the SSUTA.
"I think you could write a question for a poll that shows 90 percent of people don't want the Internet tax," he said.
McClellan said the ERA believes the Internet provides small businesses with a tool to compete with larger companies by giving them "a marketplace that is much bigger than their geographic footprint."
"It's just my experience that this technology gives people the ability to have a sustainable business model," he said. "A lot of people in the Internet community feel like (the SSUTA) is an anti-competitive effort to suppress any up-and-coming competition."
Though he chose not to give a name, he said ERA's fastest growing company -- a fitness company that grew from nothing to more than $500 million in sales in four years -- has expanded by creating a network of coaches across the U.S. By doing so, the company is now required to pay sales taxes in the states the coaching network reaches.
"It's almost a self-correcting issue," McClellan said. "As a company grows and wants to expand, they have to go ahead and create nexuses in certain areas."
ERA is a trade association that represents more than 450 direct-to consumer companies in 45 countries. It is based in Washington D.C.