Our view: E-commerce vs. brick-and-mortar stores
The news that Amazon.com Inc. has begun collecting and remitting local sales tax to the city of Steamboat Springs on certain online purchases is a welcome development, and it represents a small step toward leveling the playing field for local retailers.
City Finance Director Kim Weber was unable to provide specific information about the amount of sales tax revenue Amazon is remitting to the city because that is proprietary in nature, but she did say it represents less than 1 percent of the 6.6 percent increase in sales tax revenue the city saw in February.
While not a large revenue boost for the city, the fact that Amazon, the country’s largest online retailer, is paying local sales tax revenue at all is a shift from its long-held position that online purchases should be tax free.
According to the National Conference of State Legislatures, untaxed online shopping in 2016 cost states an estimated $17.2 billion in lost sales tax revenue. Numbers for the cost to cities was unavailable.
Online sellers are required by law to charge sales tax to buyers in states where the companies have a “significant connection” or nexus, which could be an office, warehouse or physical place of business or inventory, personnel, affiliates or drop-shipping relationships in that state.
Colorado also has a Notice and Report law in place that states any online seller who is not already required to collect sales tax in Colorado but who grosses more than $100,000 in sales from buyers in Colorado must provide a notice that use tax is due on the sale with every transaction involving a Colorado buyer.
Also, every year, e-commerce businesses must provide customers who purchased more than $500 from their sites with an annual purchase summary outlining the use tax they owe. The online seller is also required to provide that information to the Colorado Department of Revenue.
Laws like this ensure that states receive the sales tax that is due to them from those who choose to shop online, and these mandates also help make sure brick-and-mortar stores, which are valuable contributors to local economies, get a fair shake during a time when online-only retailers have an unfair commercial advantage when no sales tax or use taxes are levied on purchases.
At the local level, the small uptick in sales tax revenue the city of Steamboat is now receiving from Amazon can be considered a win for main street businesses, which have been battling the rise in online shopping for years now and losing ground.
We’ll also be watching to see if the U.S. Supreme Court overturns a pre-internet precedent that exempted online merchants from collecting sales taxes if they didn’t have a physical presence in the state. If the justices decide online shoppers should pay sales tax, it would mark another win for local retailers and communities like Steamboat which depend almost entirely on sales tax revenue to operate. It would be a big victory.
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