Internet Sales Tax May Not Be a Disadvantage

May 20, 2013

Congress may soon vote on whether to require Internet sellers to collect sales tax on behalf of states.  Proponents argue it’s only fair - that charging sales tax on all transactions will level the playing field for brick and mortar stores, but some experts say the added tax will make little difference - that Internet sellers will still enjoy a huge advantage.  Sandy Hausman talked with one of them and filed this report.

Bob Ballenger - a professor of business administration at Washington and Lee University - says charging tax on Internet sales won’t make much difference for bricks and mortar stores.  They’ll still be at a big disadvantage, because their overhead is higher.

“They have to have more employees.  They have to have higher priced real estate, because most brick and mortar stores are located in malls or downtown areas that have very expensive rent, while an online organization can operate out of a garage or a warehouse, and they just need a lot less people.”

And how much difference does that make?

“The overhead is so much less for an online store that most of them can offer free shipping, make the same margins or even better margins and still sell at a lower price.”

Still, Ballenger believes Congress will eventually vote for sales tax on Internet purchases, because states are losing too much money.

About 22 billion dollars worth of revenue to be split up among the states that charge sales tax, and wha’s interesting is that most people should be paying this tax anyhow, because most states now require that when you fill our your income tax form, there’s a line on there, how much sales were internet sales, and you need to pay the tax on that, but the compliance rate on that is about 3%, and so states are basically saying we want to be able to have access to this revenue.”

Ballenger, who lives in Lexington, says Internet sellers enjoy one other big advantage - convenience.  For people who don’t want to drive from rural areas to cities or fight urban traffic, buying from the Internet is a blessing.  I’m Sandy Hausman.