A taxing issue for retailers, e-tailers

WASHINGTON, D.C. - The huge increase in 1999 Internet holiday sales and e-commerce's increasing popularity present a question of taxation equality between bricks-and-mortar and clicks-and-mortar. Cambridge, Mass.-based Forrester Research projects that on-line sales will grow to $18 billion by 2001.

In 1998, Congress approved the Internet Tax Freedom Act. The Act established a three-year moratorium (Oct. 1, 1998 until Oct. 21, 2001) on state and local taxes charged to Internet access services and e-commerce purchases. The exception to this law is that if retailers have a physical 'nexus' in a state (a store, warehouse and a distributor - such as with catalog retailer), then the company must collect state and local sales taxes.

According to traditional retailers and retail organizations, e-tailers who do not have to pay these taxes have a pricing advantage and are jeopardizing the city governments that depend on those taxes. So far, e-commerce retailers and consumers have had the advantage of no taxation on merchandise bought through this medium.

Traditional retailers are on a quest for tax equality, and they are not alone. The International Council of Shopping Centers (ICSC) supports an Internet sales tax and has lobbied Congress for the enactment of such a law. In January, the National Retail Federation (NRF) board of directors met and voted to adopt a position of taxation parity and became active in the e-Fairness Coalition - a groupof real estate organizations, retail associations and retailers that are seeking a level playing field for both bricks-and-mortar merchants and e-tailers.

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