Cyber Monday: Sales tax trail leads to econ, small business stories

According to ComScore, the most-visited retail website on Black Friday was e-commerce giant Amazon.com Inc.

Today being Cyber Monday — the e-commerce answer to the post-Thanksgiving shopping frenzy encouraged by brick-and-mortar merchants — one hot topic is the collection, or lack thereof, of sales taxes on electronic purchases.

If you haven’t covered the topic lately, now is a good time to review your state’s rules and regulations for readers, so they know what they’re liable for reporting come income-tax time in a few months.  And if that doesn’t appeal, it’s still a good peg for nosing around your state’s sales tax policy and data for other interesting angles.

Online retailers’ refusal, in most cases, to be responsible for collecting state sales tax is based on a 1992 U.S. Supreme Court decision in the case of Quill Corp. v. North Dakota; essentially the court ruled that companies without a physical presence in a given state are not responsible for collecting taxes on behalf of that state.  The case applied to a mail order firm but Internet retailers have used it as a rationale for  avoiding the complicated task of compiling with dozens of states tax codes plus thousands of local sales taxes where applicable.

But with Internet retailing becoming such a big part of many  households’ shopping patterns, states — cash-strapped on a number of levels, as you know — are becoming increasingly anxious to recover the revenue, which the National Conference of State Legislatures estimates at more than $23 billion for 2012, according to this Sandra Block column in USA Today.  That’s a  lot of foregone revenue.

And it’s not just state governments that are licking their chops over taxable online purchases; traditional merchants argue that the uncollected taxes are, in effect, a discount for online shoppers that puts Main Street retailers at a competitive disadvantage.

Source: National Retail Federation graphic

Check out this National Retail Federation blog post with a snazzy graphic; it outlines three bills in Congress that would address the matter. The NRF’s “Retail means jobs” site also includes state-by-state data on jobs, revenue and wages it says are attributable to the retail sector.  (I’d delve pretty deeply into these numbers, which are based on this PriceWaterhouseCoopers LLC  study commissioned by the NRF. )

I think you can explore these proposed new laws and their pros and cons with online and offline merchants in your area, and with marketing or consumer behavior experts at consulting firms, business faculty at universities and consumers themselves.  Do people really take into account the sales tax evasion when they make a purchase decision?  Do shipping costs offset the competitive disadvantage the Main Street merchants claim?  What do state officials estimate they are missing in uncollected taxes and what shortfalls could that money offset?

Meanwhile, state sales tax collections (and local, if applicable) as an economic bellwether is another tack you can take.  If you’re lucky, your state is very transparent with sales tax data — like this timely and interesting report that Texas issues about monthly sales tax collections by city.  It includes comparable numbers from a year ago and percent changes; the ebb and flow of sales taxes can suggest stories to pursue.  Are tax collections waning because there are fewer businesses, or because existing businesses are selling less stuff?  Or both?  Same for the gainers.  Texas also publishes a weekly summary of sales tax permit applications, complete with the names and addresses of applicants; what a great lede to new or changing businesses in your neck of the woods.

Generally individual corporate sales tax returns aren’t available via FOIA because, I assume, they would reveal proprietary information.  But talk with your state sales tax administrators about what data is available and how it can be sliced.  Sales tax collections by zip code, or type of establishment, or other parameters could make for some interesting approaches.  Delinquent sales tax filers (are some small businesses holding back on paying taxes they owe because they are short on cash) might also be fertile ground.