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Should Internet Transactions Be Taxed?

We have talked about the sales tax issues in past columns, and how acute the concern is for Putnam County to be able to bring in sufficient tax revenue as a result of sales being made within our borders. Another consideration is the effect Internet sales are having on local sales tax receipts. Last year, legislation was introduced in the House of Representatives, aimed at leveling the playing field for local retailers by closing the so-called “online tax loophole”.

The idea behind the tax, as illustrated in H.R. 2775, is to create a Federal standard whereby the sales tax wherever the buyer is located would be charged on the internet transaction, much as if the buyer went to a local store to purchase. Hopefully it would be beneficial in making it less advantageous for people to buy online to avoid skipping out on paying sales tax.

There are some concerns over this approach, however. Many local businesses sell online too, and have adapted to the new paradigm caused by the Internet marketplace over the years. For those businesses, it is possible that this new regulation could create a burdensome accounting challenge and also place them at a continued price disadvantage over larger chains. There is also the question of how foreign sales and purchases would be handled. And would every individual who sells something on eBay have to collect sales tax?

It is laudable for our legislators to seek answers to this very important question. While the abovementioned bill may or may not solve the problem, it’s good to see some attention being paid to the question of how to give our small business communities the best chance to compete fairly and equitably in an increasingly global marketplace.

– Jennifer Maher, Chairwoman, the Putnam County Chambers of Commerce

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