Why Tax-Free Online Shopping May Soon End in Ohio and Other States

Why Tax-Free Online Shopping May Soon End in Ohio and Other States

Date: 21 Jul 2012 | posted in: Media Coverage, Retail | 0 Facebooktwittergoogle_plusredditpinterestmail

The Plain Dealer, July 21, 2012

Your days of getting a sweeter deal by buying tax-free online may be ending. In an era of tighter government budgets, more states are looking to recapture the tax dollars that are lost when Internet sellers don’t charge state and local sales tax. What looks like a savings to the consumer actually amounts to an estimated $628.6 million that would otherwise go to the state of Ohio and local governments this year, says the National Conference of State Legislatures.

Those deals let online sellers undercut prices and take hundreds of millions in sales away from bricks-and-mortar retailers, a University of Cincinnati Economics Center study found.  The pricing difference stems from a 1992 U.S. Supreme Court decision that said out-of-state retailers don’t have to collect state and local taxes from residents of Ohio or other states where they don’t have a physical presence.   Amazon.com, the largest online retailer, has struck deals to charge sales tax in half a dozen states, sometimes as part of a deal to build warehouses there.  But a proposed federal law would give all the states the authority to collect what’s due no matter where the retailer is located.

Stacy Mitchell, senior researcher with the nonprofit Institute for Local Self Reliance in Minneapolis, said, “Now that so many people are carrying smartphones, with apps that encourage people to go into stores, scan bar codes and buy the product online, retailers are feeling this much more than they used to and across a much larger variety of sectors.”

Requiring everyone to pay sales tax is fairer for all consumers, she said, “because if you’re a consumer who prefers to shop at physical stores, and your neighbor prefers to shop online, they’re getting a price break that you’re not.”

“Also, it’s a tax advantage that disproportionately benefits higher-income people,” because lower-income shoppers tend not to have jobs where they can accept deliveries during the day or where they have Internet access.

Read the full story here.