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This 'Cyber Monday' could be last before sales taxes hit
[November 26, 2012]

This 'Cyber Monday' could be last before sales taxes hit

Nov 25, 2012 (The Washington Times - McClatchy-Tribune Information Services via COMTEX) -- This could be the last year that "Cyber Monday" serves, for all intents and purposes, as a tax holiday for binge shoppers across the country.

In the push to make online retailers collect sales tax, Congress is close to passing a federal law that would force consumers, who have been going to the Web to dodge these fees, to pay up. The Senate and House see bipartisan support for similar bills that lawmakers say could be passed by year's end.

The movement to step up collection of online sales tax is gaining momentum from state governments that are strapped for money and looking for new revenues, as well as traditional retailers that want to level the playing field.


But some fear it could discourage online shoppers. Not collecting sales tax has given Internet retailers a price advantage that they may lose to brick-and-mortar retailers.

"You'll hear grumblings," said Kay Bell, a tax analyst at Bankrate.com. "People who were shopping simply to get the tax savings obviously aren't going to get that. So they probably will look around and see if they can get what they want in person instead of online." Still, online stores offer the convenience of shopping from home, analysts say, which gives them another competitive advantage over traditional retailers.

"The key is that when consumers are looking to buy a particular item, regardless of what it is, they are first searching on the Web to find it," said Steven Aldrich, CEO of Outright.com, an online bookkeeping service that helps small businesses keep track of sales and expenses. "Then, it's so simple for them to buy it there.

Overstock.com, which would have to collect millions in taxes if a federal law is passed, says its website is much more friendly than the long lines customers face at retail stores on Black Friday.

"When I do my shopping, I try to avoid the mall at all costs," Overstock President Jonathan Johnson said. "You get all bundled up, fight traffic, find parking, elbow through all the shoppers, then wait through a long checkout line. There's nothing fun about that." This comes as e-commerce sites are outpacing traditional retailers in sales. According to the U.S. Commerce Department, online sales in the third quarter rose 17.3 percent from the previous year to $57 billion, compared to total retail sales, which rose 4.6 percent.

During the course of the holiday shopping season, comScore, a digital analytics firm, forecasts online sales will rise another 15 percent to 18 percent.

Cyber Monday, in particular, could enjoy a 30 percent boost in online spending from last year when it grew to $1.25 billion in sales, according to comScore.

State governments that are desperate for money to cover their budget gaps are hoping to get a piece of the action. Studies show that collecting online sales tax would generate about $23 billion in revenue.

"You have got to make sure a sale is a sale, whether it takes place downtown or online," Rep. Steve Womack, an Arkansas Republican who is sponsoring the House bill, said in July.

Brick-and-mortar retailers are also feeling the pressure. The tax advantage their online competitors enjoy is helping them gain market-share. In the third quarter, e-commerce accounted for 5.2 percent of total sales, according to the Commerce Department, but J.P. Morgan analyst Doug Anmuth predicts that number could rise to more than 10 percent this holiday season.

Traditional retailers, who already collect the tax and, therefore, appear more expensive, want e-commerce sites to play by the same rules.

"It's becoming a very, very unfair tax," said Rachelle Bernstein, vice president and tax counsel for the National Retail Federation, which represents both online and traditional retailers. "We think it's time to eliminate that disadvantage." The tax is not new. The only difference is a federal law would allow states to require that online stores collect taxes from out-of-state customers, many of whom don't realize they are supposed to pay it to the government on their own.

In Quill v. North Dakota, the Supreme Court ruled in 1992 that states could not force companies located outside their boundaries to collect their taxes on long-distance sales. So, currently, e-commerce sites collect taxes only from customers who buy within the state where they are located. That could mean being headquartered in a state or having an office, distribution center, sales representatives or retail outlets there.

But proponents of online sales tax say this ruling occurred before the Internet was widely used as an e-commerce tool, and therefore, it should be reconsidered.

Furthermore, this has caused confusion for online retailers, who have to figure out which states they have a "physical presence" in and what the different tax rates are for the various districts.

Experts say a federal law would lend some continuity to the situation. The issue is heating up in Congress. The Senate's Marketplace Fairness Act and the House's Marketplace Equity Act are similar measures. Lawmakers on both sides say they are working together to smooth out the differences.

"The essence of the two bills are very much along the same flavor," said Mr. Womack's spokeswoman Claire Burghoff.

Even with Congress focused on the pending "fiscal cliff," some lawmakers believe an online sales tax bill could get passed by the end of the year.

Sen. Richard J. Durbin, Illinois Democrat and one of the original sponsors of the Marketplace Fairness Act, is optimistic about getting the bill to the floor for a vote in the lame duck session, as opposed to taking it up in a new Congress, his spokeswoman Christina Mulka said.

Daniel Head, spokesman for Sen. Michael B. Enzi, the Wyoming Republican who is sponsoring the bill, said the same thing.

"We're still pushing the bill, looking for every opportunity to move it forward," he added.

In the House, the prospects of getting a bill through this year are also good.

"We've just gained a lot of traction this year, and so we're at a point where we can see it going through," Ms. Burghoff said. "So having to reintroduce that legislation just takes some momentum out of the process that we have going for us right now." ___ (c)2012 The Washington Times (Washington, DC) Visit The Washington Times (Washington, DC) at www.washingtontimes.com Distributed by MCT Information Services

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