Sections

One of the first changes I made when I came to college was shifting a majority of my purchases from trips to the store to a few clicks on my computer. I didn’t have a car, the Boston shuttle equaled a three-hour round-trip if I caught successive shuttles and being a college student didn’t erase my appetite for movies, games, etc. Less than a month into my first year I created an Amazon account and started ordering things online.

Online shopping usually has both advantages and disadvantages. On the negative side, the consumer might have to pay shipping, cannot get the item the same day and cannot do immediate returns. Additionally, depending on the site or the reason for return, the customer might have to pay the return shipping costs, taking a financial loss if the item is defective or otherwise not-as-described. On the positive side, it takes very little time to buy stuff online, you can quickly compare prices between stores or different brands, and you can even sit in a comfortable chair or recliner as you do your shopping. Additionally one of the biggest advantages of online shopping is one we have due to laws not catching up with modernity. I’m talking about sales tax.

Because states cannot collect sales tax from online sales, if the retailer doesn’t have physical stores, when I shop at Amazon.com, sales tax is not added to my purchase like it is when I buy something from Best Buy, Target or Toys “R” Us. Even if a customer shops online, if the retailer has a physical store, then the website collects sales tax because states are allowed to collect the taxes.

Why is it that some retailers are able to undercut others by appearing to sell stuff as tax-free? The answer is because it’s not supposed to be tax-free. When anyone buys something online and sales tax is not collected, they are supposed to assess and report the owed tax on their own. The problem with this is two-fold; who would voluntarily hand over their sales tax after-the-fact? For instance should a college student with no job file an income tax return just to hand over $20 in uncollected sales tax? Furthermore, does anyone actually keep all of their receipts for a year? For example, I usually keep a receipt until the return period or warranty expires. The other issue is that many people simply don’t know about the self-reported use tax. Admittedly, I only know anything about it because I have family in the business world. If not for one or two people I’d have never heard of the use tax and continued simply to think it was awesome that I could buy stuff tax free.

Because of these problems with the use tax, Amazon and other online-only retailers should be required to collect sales tax at the time of purchase. Aside from making it easier for the consumer to comply with the law, it creates a more level playing field for everyone. Yes, we all might get a little annoyed if Amazon started collecting sales tax and our purchases might end up being a few dollars more, but if online retailers collect sales tax then they will have to compete with traditional retailers through sales and other ways to offer the best prices for the consumer. In the current system Amazon can sell everything at the same list price as another retailer but Amazon gets an inherent advantage because when buying something, Amazon doesn’t automatically add tax to the total.

If all retailers, online or not, collect sales tax it will benefit the consumer in two ways. Firstly, it will benefit the consumer because, with a more equal playing field, retailers will have to offer better sales and promotions in order to get an advantage over other retailers and convince a consumer to shop at a specific store. Secondly, sales tax from online purchases would help fund government budgets. This week in Minnesota the state legislature is having hearings on possible solutions to the Vikings’ (NFL) stadium needs. One of the biggest issues they are trying to figure out is how to fund the public contribution without raising taxes. While I certainly don’t think sales tax from online purchases alone would suddenly be able to fund huge projects like stadiums, it could at least add needed revenue to states by simply shifting online sales from the self-reported use tax to the always-collected sales tax.