On Black Friday, the New York Times published an editorial praising a New York state law requiring on-line retailers to collect applicable state sales tax on all purchases. The requirement, in abeyance pending court challenges, makes a lot of sense. Yet history doesn’t bode well for the new law. And states are likely to continue to lose precious revenue as on-line sales grow.
A long-simmering dispute over whether online retailers must collect sales taxes is boiling over again. Two Web retailing giants, Amazon.com and Overstock.com, are severing relationships with local businesses in states that are trying to force them to collect the levy, angering cash-strapped states and sending bloggers into an on-line frenzy. There are three things you should know about this squabble. 1. It has nothing whatever to do with ‘taxing the Internet.” 2. You owe the tax anyway. Amazon would make the paperwork easier for its customers by collecting the money at the time of sale, but whether it does so or not, you still have to pay. Not that many of us do, but that is another story. 3. According to one estimate, by 2012 state and local governments will be losing as much as $12 billion annually from uncollected taxes on online sales. There is real money at stake here.