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Should Online Stores be subjected to State Sales Tax in U.S.?

Updated on December 16, 2012



As today society is making technological advancements, the methods by which businesses sell their products are also changing. We find a large pool of online storefronts giving us deals that physical businesses cannot offer? Why is that the case? Why do we get better deals online as consumers? How reliable those deals are? Is it hurting society in any fashion? Do we have to customize laws to change the way we look at these businesses as pillars of financial advancements? And thousands of related questions are popping and would pop up. I read a news today about Amazon shutting down a wholesale facility in Texas in order not to pay tax. Do not know the reality however got inspired to write this article.

This article is going to provide an overview from various angle is purely my own view without any intentions to harm anyone or to bring any forcible changes. It is purely a viewpoint and is more to invite thoughts for all who are responsible for building and sustaining next generations of the society. Also I have least knowledge of inside stories for online retailers, state tax laws and so on and am writing this article as a layman who wishes best for our society.

So let us go:

Realiability and Effects

Are those deals reliable? Again no brainer for any online shopper who had 90% times success and money saving buying it online. If you are buying it from the right site that got good reviews and is well known for good business practices then yes, those are reliable deals.

Advantages? A tricky one. It definitely is helping both the consumer and the businesses. The competition gets better and healthy and a lot of options of several thousand products that would be out of reach for an average an are now available with ease. For online selling, it is creating thousands of jobs for software engineers, network engineers, hardware engineers, online marketers, advertisement designers and so on.

Why we get Deals?

The question is “no-brainer” and for anyone with little knowledge of business can answer it. We get online deals because online retailers cut a lot of overhead costs that they would incur for a product otherwise if they are selling it through a retail store. From shipping costs to large wholesalers to small wholesalers to sales representatives to retailers and many unlisted here, everyone bears a cost for this product and gets a share for their contribution to bring this product through a physical retailer. That all money is saved when the consumer buys it from an online giant as the business is able ship us directly without incurring many of the intermediate costs. Of course someone would argue that a part is gone into online advertising however that cost is much lower as to what is spent in “old fashioned” way


However it is also hurting those traditional supply chain intermediaries whose living disappeared. All those hidden workers who earlier got these products to you lost their money that they would have made living. The jobs that are being created are for specialized skills and the traditions mom and pop shops cannot catch up. And you or your loved ones could be one of those affected intermediaries too. The federal and state governments are losing billions in their sales tax as these stores do not have any physical storefront in your city as per a law passed in 1992 in U.S. as per which not having physical storefronts saves you from paying sales taxes. We are society of mannerism and obedience and we follow what our parents and elders have created for us in past in form. And so we abide by which is sign of healthy evolution.

So what do we do?


What action we can take as a society to continue enjoying the benefits of this and avoiding the ill it is causing slowly and slowly?

1)      We need to review our laws. Not having physical store presence in a city is no more a constraint for businesses. They can reach out to their consumers in their homes. However they would also force local businesses to close down or make them barely living their means. We need to change the expand definition of storefront and if state officials can hit a website who is selling product, they can implement for annual state filings for generated revenues and charge mangeable sales taxes. When businesses are shipping they know exactly where they are sending. By applying simple practices of data management and analysis, annual filings should be no brainer for these online retailers.

2)      Governments can tie up with the internet providers who are sending the internet connections to individual consumers and implement web address filters. They Display friendly messages to consumers and charge them sales taxes directly if they would like to buy from an online retailer or charge nominal access fee from online sellers to be allowed to reach out to local consumers. Through anecdotal discussion, it seems some countries have control over the businesses to display their retail websites

3)      Design programs for direct online selling manufacturers/wholesalers to participate with the local stores to offer products locally occasionally at comparable discounted prices and share the profit/loss with mom-pop shops. It would help keeping the local retail system alive and prevent unwanted forced bankruptcies

4)      The postal and shipping systems can capture easily the wholesale online suppliers and make agreements to charge decent taxes and share such revenues with governments to function comfortably

With everyday we are inching towards technology-filled era full of online selling and governments and society need start thinking about this, if they have not. The system chaos can be prevented now if we do part of our responsibility and think favorably “Live and let live”


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      GS 5 years ago

      No new taxes!