Proposed Internet Sales Tax Law – Insight and Perspective

1982First things first – I’m no fan of taxes.  It kills me to lose a huge percentage of hard earned income to anyone, including the government.  And as a small business owner, I happen to pay a lot of different taxes & fees – income taxes, payroll taxes, property taxes, personal property taxes, trader’s license fee, etc…  But 20 years ago, I was told something simple by my accountant that I’ve always remembered – “taxes are a function of doing business”.   So, I have learned to accept that I will always be taxed more than I feel is deserved.   And, I sometimes feel fortunate just to be  paying the taxes that coincide with our continued business.   We’re glad to be here – and taxes are just a part of our business expenses.  But, paying our taxes is still a little painful.  Now, as a change in the internet sales tax looms, I am conflicted – and I feel compelled to explain a few things from a retailer’s point of view.

Consumers have been trying to avoid paying their state’s sales tax forever.  The internet has simply made it easier.  As a retailer in Maryland, I am obligated to collect sales tax for all sales within the state of MD, where I have a physical presence.  However, I am not obligated to collect sales tax on shipments that I make to destinations outside of MD.  Likewise, retailers from other states are not obligated to charge tax for shipments made to MD, unless they have a physical presence here.  It’s been a great loophole for consumers who feel that low price is their #1 priority.  But with the increasing reality of internet shopping, this loophole has been taking billions of dollars away from state coffers each year.   And what most consumers don’t seem to know or care about , is that they are actually supposed to report their out-of-state purchases, and pay a comparable use tax to their State.  Every state that has a sales tax, also has a use tax.  See MD’s form here:  http://forms.marylandtaxes.com/03_forms/usetax.pdf  My guess is that 99.9% of use taxes are never filed or collected.  In my opinion, a major contributing factor to the rise in state sales taxes has been the incredible growth of internet shopping.  States are losing so many sales tax dollars from unclaimed internet purchases, that they have been forced to raise their sales taxes and find other ways to get paid – because, rest assured, they will always find a way to get “theirs”.

If you’d like to read a short & very informative article on the fairness of sales tax, check this out:  http://www.nytimes.com/2013/05/02/opinion/fairness-on-sales-taxes.html?smid=fb-share

As a seller of cameras & related accessories, my products sometimes have a high $ value, while being relatively easy to ship.  This makes it easy to buy & sell cameras online.  I can have the most competitive price anywhere, but my price to MD customers will always be 6% more than my out of state, comparably priced competitor.   I am asked by consumers, literally every day, to match an online retailer’s delivered priced.  In essence, I am being asked to lower my price 6%, and pay the sales tax.  Unfortunately, the camera business is one with extremely thin margins (we don’t make a lot of $ on products), and I am often unable to comply with my customer’s request..  Sometimes the customer will buy from us anyway, because they value our expertise, guidance, and high level of personal service.  But more often than not, we lose a sale after investing a fair amount of time with the customer.  That’s the main problem of being a brick & mortar business, in today’s internet economy.  As I have seen most of my regional competitors go out of business, I’ve known that something’s got to change – and the sooner, the better.

The camera & consumer electronics industries are ones that include constantly changing prices, and a fair amount of price matching.  Manufacturers are trying to stabilize the marketplace, and I am thankful for their efforts.  But, no marketplace will ever be completely stable or predictable.  When I am asked to match a competitor price, I’ve tried to view it as a luxury and an opportunity.  My customer is basically saying “I’d like to buy the product from you – can you help with the pricing?”  It’s an opportunity to educate my customers about product differences, reasons for price differences, along with warranty & service differences  – stuff that all has a very real effect on their purchase throughout the useful life of that product.  But I’ve got to be honest – after 25 years in this business, it’s getting harder & harder each day to treat the constant price matching requests with that positive attitude.

 I’d love for all consumers to appreciate our approach to the camera business – which is centered around great products, competitive prices, friendly guidance & instruction, and a total dedication to personal customer service.  Unfortunately, my wishes are a bit unrealistic.   Because while some of our customers certainly do value what we bring to the table, many are happy to take advantage of our expertise – only to buy online and avoid paying sales tax.   In today’s economy, it seems that only a very small price difference is needed to shift consumer loyalty.  I’m hoping that the sales tax fairness act levels the playing field somewhat, while maintaining the competitive nature of business.

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