A study released Wednesday by Active Research revealed that the majority of Americans would spend less online if their e-purchases were taxed.
The Burlingame, California research firm’s survey of online shoppers found that 66 percent said that their online shopping behavior would decrease if Internet sales were taxed. More women (71 percent) than men (64 percent) would shop less online if their purchases were taxed.
Currently, e-tailers are required to collect sales tax only if they have a physical presence in the purchaser’s state. However, brick-and-mortar stores as well as state and local government officials would like to see all e-commerce taxed.
“The findings of this survey are a clear indication of current attitudes of e-commerce consumers as Internet taxation continues to be debated in the halls of government,” said Active Research vice president of marketing Daniel Greenberg.
Leveling the Playing Field
At a September hearing of the Streamlined Sales Tax Proposal — an initiative that aims to streamline the sales tax system for both online and offline merchants — Michael Brodie of the National Association of Realtors (NAR) made the case for taxing e-commerce.
“It doesn’t take a rocket scientist to figure out that consumers would prefer not to pay sales taxes,” Brodie said. “But this is not the issue. If we allow Internet sellers to offer tax-free goods but require our local merchants to collect sales taxes, we encourage a basic economic shift in consumer behavior. That is, consumers will increasingly make purchases in cyberspace — not from their local merchants.”
In April, 42 state governors sent a scathing letter to Congress attacking the final report of the Advisory Commission on Electronic Commerce (ACEC). In the letter, the governors said that accepting the ACEC’s recommendations — which include permanently banning taxes on Internet sales — had the potential to reduce state and local tax revenues by more than $30 billion (US$) per year.
On the other side of the sometimes acrimonious debate are e-tailers who believe having to collect sales tax on purchases made by shoppers across the United States would be an unfair burden. There are currently thousands of government entities within the U.S., most of them municipalities, that collect sales tax.
Siding with the e-tailers are several politicians and government officials who believe taxing e-sales would stifle the growth of e-commerce. U.S. vice-presidential candidate Joseph Lieberman said Tuesday that, if elected, the Democratic ticket would ward off efforts to impose taxes on e-commerce for the next two to five years.
In June, U.S. Treasury deputy secretary Stuart Eizenstat declared the agency’s support of a permanent Internet sales tax ban, in spite of the contribution such taxes would make to U.S. coffers.
“We need to be sure that we do not discriminate against sales on the Internet and thereby impede the growth of e-commerce. We need to ensure that governments finance themselves in a way that does not impede the growth of the Internet,” Eizenstat said.