Retail Coalition Pushes For E-Commerce Taxes

A group of brick-and-mortar businesses from South Carolina to Michigan have united in an effort to push for the taxation of electronic commerce.

The E-Fairness Coalition, which includes the International Council of Shopping Centers, the American Booksellers Association and the National Association of Real Estate Investment Trusts, is arguing that a tax-free Internet will cause consumers to bypass their businesses in favor of electronic options.

Additionally, state and local governments fear that they will lose billions of dollars (US$) in local tax revenue if legislation to tax e-commerce is not passed quickly.

Michigan Already Taxing E-tailers

As the debate rages on, at least once member of the coalition has already taken action. The Michigan Department of Treasury has begun collecting taxes from all mail order and Internet purchases made in the state. While online merchants have characterized the action as being draconian, the Michigan Retailers Association has praised the state’s aggressive tax collecting stance.

Meanwhile, the Advisory Commission on Electronic Commerce is meeting next week in San Francisco, California to debate a variety of tax proposals.

To Tax Or Not To Tax

Last month, Virginia Governor James Gilmore, the chairman of the 19-member panel, proposed the elimination of all sales taxes from online sales. Gilmore’s plan would also eliminate all but one-third of a three percent federal excise tax on local and long-distance telephone service, while giving the remaining one-third to states in an effort to make up for taxes lost to Internet sales. This adjustment would amount to $1.7 billion over a three-year period.

However, U.S. House Budget Committee Chairman John Kasich and others want to put a permanent ban on e-commerce taxes.

Will Schools Suffer?

This kind of talk is creating panic among some local governments and brick-and-mortar merchants. Local governments claim that they will lose at least $5 billion in annual sales taxes if e-commerce is exempted. This situation, they contend, will seriously affect the funding of public schools and other services in the U.S. municipalities.

However, opponents of new e-commerce taxation point out that there are already laws on the books requiring consumers to report and pay sales taxes on goods and services purchased out of state.

While the National Conference of State Legislators concedes that such laws do exist, it points out that less than one percent of consumers currently report and pay taxes on such purchases.