The Last Frontier of Low Taxes

The equalizer for the mortar and bricks sellers is that internet and telephone/mail order sales involve an ever growing FREIGHT charge. That differential may not be greater than the cost of driving to the store plus the sales tax. But I'm not so sure people are only thinking about the sales tax when they make their decision about how and where to buy something. Heck, I'm a CPA, and when I'm shopping in a store I rarely think about the sales tax until the cashier has rung up the sale!

There are other advantages that bricks and mortar stores have over internet sellers and vice versa - here are a few:

Immediate gratification vs waiting - Bricks

Seeing and feeling the shirt /trying it on/demo-ing the computer , camera or other gizmo/ skimming the book/ having a latte/ interacting with a live, knowledgeable sales person - Bricks

Price and selection - Clicks

It isn't just about the internet - it's about all interstate sales (at least where the seller doesn't have Nexus). Long before the internet, people would pick up the phone and order goods from an out of state seller and not pay a sales tax. The Quill case predates the internet by at least a decade. And what about all kinds of businesses sending goods, installers, technicians and consultants, etc, etc into other states? Not all services are sales taxable but it isn't just sales taxes - there's corporate and personal income taxes, too. Many businesses file and pay all these taxes, but many don't.

But why stop there? Do all bricks and mortar stores report all their cash sales?

I doubt it. And then there are all the service businesses - like the one that mows your lawn. Or the one that puts siding and new windows on your house, etc, etc Did anybody ever say to you, "If you make the check out to cash, I won't charge you tax?"

Most mail order and internet businesses use credit cards and are creating a trail, but of course they can be playing games with their tax reporting just as easily - I won't even mention them here - I don't want to give anybody any ideas.

Administration of sales tax can be handled by computer software driven by the zip code of the ship-to address and a well thought out Streamlined Sales Tax that has been slowly being crafted by a consortium of 20 or so states.

David Propper, CPA of NY 10:24AM May 22, 2008