Online Store Owners: Why Don't You Collect Sales Tax?

6 points by gierach 14 years ago | 8 comments

I was pondering over the Amazon/California Sales Tax story and wondered why more eCommerce sites don't collect sales tax. If you don't collect sales tax from your customers, why not?

glimcat 14 years ago |

In the battle of Amazon vs. Walmart, I have to vote Bezos.

Also, healthy interstate commerce is rather important to the continued success of the Union. WTF, Walmart? If this goes ad absurdum and any jurisdiction can tax any transaction which has an endpoint on their turf, interstate commerce would potentially require tracking compliance with thousands of jurisdictions. "Insane" doesn't begin to cover it.

If I assume that Walmart's strategists are rational, the real intent is probably something like "make Amazon waste money" or "make Amazon get negative PR" or "make Amazon be distracted while we update our business strategies." Probably all of the above, but it's still insane.

pawn 14 years ago | |

I think the intent is closer to "we would remove taxes if it were possible but because we can't, we want you to pay so that we can compete on price." As a consumer, if I see Walmart selling something for $3 cheaper but with $4 taxes making it higher, I'll go with Amazon as its cheaper overall. It sucks for Walmart because they were willing to mark their item down further than Amazon and still lost the sale. Then there are some items you know that everyone has to charge one price for. It will always be higher at Walmart

chelaine 14 years ago |

Plus, if memory serve, there is a spot on the taxes form to enter out of state purchase so taxes can be paid if due.

It is not the responsibility of the out of state merchant because it is that of the person who makes the purchase.

orangecat 14 years ago |

If you're not legally required to, why on earth would you?

gierach 14 years ago | |

I guess I'm a little confused on the legal requirements surrounding sales tax for online vendors. If brick and mortar shops are required to, why aren't shops online required to? I understand that technically it's the shopper who owes the tax, but though businesses were required to collect it on their behalf.

orangecat 14 years ago | | |

My understanding is that a state can only require you to collect sales tax if you have a physical presence in that state. Thus the Amazon affiliate fiascos, where states claim that if Amazon pays affiliates there, that's sufficient to create a "nexus" and make them obligated to collect taxes.

sixtofour 14 years ago | | |

"If brick and mortar shops are required to, why aren't shops online required to?"

Because that law hasn't been written. Don't confuse fair with law.

diolpah 14 years ago |

Online store owner here. We do collect and pay sales tax for California residents, but not residents of other states. The reason we don't collect sales tax for other states is:

1. We aren't required to.

2. Doing so would be a disincentive to sales.

3. Management of, and compliance with, thousands of different state+county+municipality combinations that change constantly would be way way way beyond the scope of an organization as small as ours.