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Brick & Mortar vs. the Internet

From Issue: Volume XXI - Number 9

By Taylor Ramsey

The Internet Sales Tax Bill is coming. The bill will require all internet retailers to collect sales taxes under the same laws that brick and mortar business operate. In other words, those of us who live in Los Angeles County will be paying the same sales tax whether we buy a book from our local book store or if we decide to make the purchase from an on-line retailer such as Amazon.

Right now California law requires us to pay the tax when we make on-line purchases, but consumers rarely voluntarily send the tax to the state.

I believe the government already takes too much from all of us in the form of taxes and fees — way too much. If I had my way, we would lower the sales tax as I believe it would actually in-crease revenues to the state in the form of increased business activity. However, that is for a different discussion and it will probably never happen.

This bill is a tough one for me. In spite of my feelings, I am leaning in the direction of encouraging my elected representatives to vote yes on this bill. The tax is not going away, so it should ap-ply to all retailers no matter their business model. I can’t believe I wrote that, but it is the right thing to do.

I am all for competition on as level a playing-field as possible without government involvement. Many consumers visit brick and mortar businesses (those that rent or own property and build-ings to provide a storefront) with no intention of purchasing a product from them. The shopper may want to touch, see, and examine the benefits of a certain product, but knowing they can save close to 10 percent in sales tax (in California) by going on-line once their decision has been made, they make the purchase from an internet retailer and neglect to send the sales tax to the state as required by law.

Suppose I wish to purchase a new laptop computer and I visit my local Best Buy to examine what is out there. I walk in and start looking and then questions regarding each model and brand come to mind. I approach a sales person to ask my questions. Great, after some time I make a decision. The laptop and other equipment and programs will cost me about $1,500. Instead of paying the extra $140 or so in taxes I decide to go home, log onto the internet and make my purchase from an on-line retailer.

In my mind I am bordering on being a thief. Why? The brick and mortar business must pay rent for the sales floor space, provide property and liability insurance, employee product training, employee insurance, hire a cleaning service, pay property taxes directly or through rent, pay transportation costs, tie capital up in inventory and take care of maintenance issues. The internet re-tailer may have some of those costs, but not to the extent of the brick and mortar store. The shopper took advantage of the store when the store allowed him to shop, compare products, take knowledge from the company trained sales person all in the comfort of an air conditioned environment. The shopper actually pocketed all that with no intention of making a purchase in the store.

If I enter more than one store to shop and learn more knowing I will make a purchase from one of them, then the store and their sales person have an equal chance to convince me to acquire the product from him or her without the worry of me going on-line to make my final purchase to avoid paying the sales tax. Visiting car dealers to test a vehicle and get the best price is fair, but visit-ing car dealers to take a test drive and then going to some auto broker you will never meet in person to make the purchase for you is deceitful. It is taking earned commission from the auto dealer sales person and delivering it to some guy with no skin in the game.

One of the arguments against the internet sales tax bill is the added costs to small on-line retailers in trying to accommodate the thousands of tax jurisdictions in collecting the sales taxes. It will add costs to the product. But then again, maintaining a brick and mortar store have extra costs too. You can bet there are already some smart programmers designing systems to peddle to on-line retailers that will make sure they can collect and distribute the taxes collected in an efficient manner.

Sales taxes apply whether we use the internet or a brick and mortar store to make the purchase. It is the law. The new bill will insure the law is applied fairly. If you are against the sales tax, fight to lower or get rid of it, but don’t give one retailer an advantage over another by breaking the current law. Passing the Internet Sales Tax Bill is the right thing to do.