Leading Question

By Hannah Wallace September 30, 2005

Could be. A California appeals court ruled this summer that Borders must pay $167,000 in back taxes on Internet sales, finally giving states and the federal government a legal argument to collect on those elusive e-commerce transactions.

The windfall could be huge. Estimates for this year put the tax loss due to online purchases at more than $18 billion nationwide.

In Florida, which relies on sales tax to fund priority projects since there's no personal income tax, the potential of an online sales tax has some lawmakers and government leaders drooling.

Doug Wheeler, vice president of the Florida Chamber of Commerce, says the chamber has supported online sales tax legislation for the last couple of years and he expects a similar bill will be filed again this year. For the chamber, the proposed legislation protects Florida's "bricks and mortar" stores that pay 6 to 7 percent sales taxes from the unfair advantage out-of-state e-tailers have. "The big hang up is in the House [of Representatives]," he says. "Overall it's being viewed as a tax increase by Republicans. No one wants to go home and say they voted for a tax increase."

In truth, an online sales tax is not a new tax, says Wheeler. Consumers were always supposed to pay a sales tax for online transactions. "You should be getting out your checkbook and making a check to the Florida Department of Revenue every time you purchase something online," he says. "It just hasn't been enforceable."

A national effort, called the Streamlined Sales Tax Project (SSTP), has developed a simplified sales tax collection system for the Internet and counts about 40 states, including Florida, as members. After years of work, the SSTP is taking off. As of Oct 1, 19 states had adopted the interstate agreement. So far, the law doesn't require companies to collect sales tax on Internet transactions in states where they don't have a physical presence, but it does provide incentives. Diane Hardt, Wisconsin's tax administrator and the co-chair of SSTP, says businesses in states that have adopted SSTP can take advantage of certified software or use free service providers who will calculate and file their sales taxes. Hardt and other advocates also were hoping Congress would be introducing legislation any day to mandate an online sales tax.

One area business owner who works in the e-commerce realm is unsure how introducing an Internet sales tax will impact his business. Evan Samwick opened e-Sales Advantage, a Sarasota-based online auction retail store, in July.

The business helps people sell items on eBay. Customers can drop off items, and Samwick and his staff will prepare the eBay listing by determining the selling price, writing up a description and taking photos, then monitor the bidding process. When it's sold, they'll package and ship the item. At the end of the sale, customers receive payment minus eBay charges and his commission.

Samwick says he doesn't believe an Internet sales tax will deter people from shopping online. He adds that the convenience of e-commerce will likely outweigh a 6 percent or so sales tax. If he were to add tax to the items, the bidders and buyers would pay more, not his customers.

"People who are confident and feel good about buying online already, I don't think it's going to affect them at all," he says.

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