Retailers Set To Vote on Internet Sales Tax

The battle over paying taxes on Internet purchases has kicked into high gear this year, as members of the National Retail Federation prepare to vote on the issue today. The vote will determine the NRF’s formal position.

The NRF, the world’s largest retail trade group with 1.4 million retail establishments as members, represents one in five American workers. On Capitol Hill, groups and individuals on all sides of this issue are anxiously awaiting the vote, as it represents a major statement on the part of the NRF as to their future relationship with e-tailers.

Some of the organization’s members are online merchants who charge no sales tax, while the majority are traditional retailers who are obligated to levy taxes on all purchases. Many traditional retailers have already been vocal and aggressive in their stance against a tax-free Internet.

The NRF and E-Commerce

The NRF has long taken electronic commerce seriously, with such initiatives as its Internet Retailing Advisory Council. The body was created to address all issues related to retailers doing business online, and includes a retailer-only committee that facilitates communication among retailers about e-tailing.

Yesterday, the NRF, Forrester Research, Inc., and Greenfield Online announced plans to create an index of online retail trends. The index will aggregate online sales data by product category and dollar (US$) value from monthly surveys of 5,000 online shoppers.

Additionally, the NRF has an Internet Commerce Council made up of leading e-commerce technology companies that assist member retailers in evaluating e-commerce technology choices.

Still, the NRF walks a fine line with many of its members, who feel that Internet-based merchants have an unfair advantage by offering merchandise tax-free.

Advisory Commission Says No E-Taxes

Earlier this month, the 19-member Advisory Commission on Electronic Commerce (ACEC) reiterated its position against taxing the Internet. Chaired by Virginia Governor James Gilmore, the commission has consistently voiced its opposition to taxing the Net.

In deference to opponents, Gilmore has proposed abolishing the three percent telecom tax and holding back one percent of that tax for states as an incentive to help them get wired. Gilmore has also gone so far as to propose bridging the “digital divide” by using money that is currently earmarked for welfare.

Since last year, local governments have been vocal in their concerns about the possibilities of local municipal services suffering without the current income from sales tax. Gilmore and his commission maintain the position that e-commerce will not hurt traditional retailers. The group is scheduled to meet again in March.

Where Consumers Stand on E-Taxes

Meanwhile, consumers are closely divided on their stand on Internet taxation. In a study released late last year by the Washington-based Internet Consumer Organization, results indicate that 58 percent of respondents who have Internet access oppose an Internet sales tax.

Among those who have already made purchases on the Internet, 66 percent oppose the tax. However, when asked if they would favor an Internet sales tax to fund better schools and transportation systems — or to add to state and local services — only 48 percent opposed the tax.

The Internet Consumer Organization considers policy positions on issues relevant to Internet consumers, including security, access and taxes, among others. The Internet has been officially tax free to date, largely due to the Internet Tax Freedom Act, signed into law in October 1998. The measure imposed a three-year moratorium on new Internet taxes.

Consumers Seem Willing To Pay Taxes to Brick E-tailers

While the tax moratorium prevents new Internet taxes, it does not extend to large brick-and-mortar e-tailers who must collect existing taxes from customers in every state where they have retail stories. Based on the strong success that many of these e-tailers had during the holiday season, numerous consumers did not mind paying this online sales tax.