A little known fact about sales tax collection is that states generally allow businesses who collect and remit sales tax on their behalf to retain a portion of the sales taxes collected to help relieve their burden. This reimbursement for their trouble is rarely discussed during the latest arguments over collection of sales taxes and may be at risk with some states. In most states, vendor compensation is only granted if the payment of sales tax occurs on time.
A Utah taxpayers association states “it is fundamentally unfair to require retailers to collect sales tax without any compensation while the entities that collect income taxes and property taxes are fully compensated for collecting these taxes.” That’s a different side of the coin this writer didn’t know about. While most compensation, or on-time payment discounts, don’t cover the total cost of collection, it should be noted that sales tax collection and remittance is not a burden borne entirely by the business.
In addition to compensation, most Internet retailers who will be required to collect and remit sales taxes won’t be required to pay property taxes on non-existent store-fronts in each state. According to the President of the Retail Industry Leaders Association, Sandy Kennedy, “To suggest that Amazon shouldn’t have to collect sales tax because it doesn’t use local services, is simply a ruse.
Nobody is asking Amazon to pay property tax on storefronts that don’t exist. The sales tax is a tax on consumption, and it shouldn’t matter if you buy a product in a store or online—the sales tax should apply equally.” This brings into question that while requiring sales tax collection and remittance on the part of Internet retailers may seem to help to level the field, with the added costs of owning or leasing property and paying additional state taxes, does the Main Street business really gain any competitive edge through equality in sales tax collection?
The most recent bill before Congress at the federal level “…would allow states that adopt a national streamlined sales tax agreement to require all out-of-state retailers, not just Internet sellers, to charge the tax. That would end, for instance, tax-free orders to Nordstrom customers in Oklahoma or Iowa.” Though various sides are arguing the matter in different ways, even Amazon states that they are “for” simple and evenhandedly applied tax rules across all states.
So, since everyone seems to be in agreement that it isn’t “wrong” for an across the board sales tax to be applied in states, it seems logical that technology has already produced a solution for making it easy and streamlined: automation. In a letter to the Wall Street Journal, Sandy Kennedy, President of the Retail Industry Leaders Association stated, “…readily available software has made sales tax collection across multiple jurisdictions remarkably simple.” It appears that technology has once again brought simple solutions to what appears to be politically charged, complicated matters.
About the Author: Susan McLain has over 15 years experience in technical and marketing writing, graphic design, business development and marketing management. She currently writes about sales and use tax issues for Avalara, Inc., a Software-as-a-Service (SaaS) company providing automated solutions for sales and use tax compliance for businesses of all sizes. The AvaTax family of products provide accurate, to the rooftop sales tax calculation, automated exemption certificate management and seamless filing, reporting and remittance of sales tax liability.