“Bring the Taxes On!” An early Christmas or Nightmare?

Conline-shopping(1)urrently, online sellers are only required by law to collect tax on the states they have a physical presence in. Online only businesses are not required to charge sales tax and consumers who don’t pay sales tax on purchases they make online are supposed to pay that tax to their state. But, that rarely happens. Only 1% of consumers actually follow that law and the rest get away with it.

Consumers enjoy the concept of buying online to avoid tax and this may be coming to an end soon if the bill for internet sales tax law is passed.  Some say, that the bill passing will be an early Christmas for Retailers that have a physical presence.  In a survey taken by an advisory firm (Alix Partners),  30% of online shoppers said they would stop shopping online and shop more at retail stores that have a physical location if all online business started taxing.  The other half of the people surveyed said the sales tax would not affect their online shopping habits. Management for retailers need to figure out the pros and cons of the sales tax online.  Some will be affected while others will not be.

Companies like Amazon were against the online sales tax bill passing at first. After years of opposition, Amazon also is supporting the bill because they are already collecting sales tax in nine of the states where it has warehouses.  While Amazon is supporting the bill now, many other online retailers are opposing the bill saying that it would hurt their business and it would be an administrative nightmare because they would have to manage to determine tax rates for different states and locations at checkout. EBay another large online retailer like Amazon, has a slightly different opinion on the tax law.  John Donahoe, the CEO of EBay  says that if congress does pass the online sales legislation, small businesses with less than 50 employees or less than $10 million in annual out of state sales should be exempt from the sales tax law nationwide.  EBay is not completely opposing the legislation, but they are saying that it should have some exemptions to it.  Americans for Tax Reform, an anti-tax group also strongly opposed the bill as well as other online retailers.

The law would only apply to online sellers that have at least $1 million in sales and do not have a physical store or warehouse.  If the bill is passes it is estimated that more than $12 billion in additional sales taxes will be collected from online purchases each year. The only concern of the bill passing is its affect on online businesses. This could be a possible nightmare for them and really hurt their business. The bill has the full support of retailers including Best Buy, Target, Wal-Mart, and Barnes and Noble because they already are required to charge tax online because they have physical presence in most states.

What could be possible techniques for online business to keep running despite them charging online tax?  Do you think that retailers with physical presence will benefit from this bill passing?

http://www.cnbc.com/id/100716012

http://money.cnn.com/2013/05/05/news/internet-sales-tax/index.html

Goodbye Small Business?

Small businesses in the United States have it bad. This is true because of too much regulation, high taxes, and now an increase in minimum wage.

So many rules and regulations exist its hard to keep up with the sheer volume of it all. With over 160,000 pages of rules, small businesses are having a hard time making sense of what is right and wrong. Alison Fraser, Director of the Thomas A. Roe Institute for Economic Policy Studies at The Heritage Foundation, says this is “a regulatory assault on our system of free enterprise and on our job creators” and I have to agree (1). The only people who will be able to withstand and flourish alongside more regulation are big businesses. This is because they have the capital, resources, and power to manage operations according to any new rule the government spits out. In comparison, small businesses will be scrambling to make ends meet.

What’s worse is that the United States also has one of the highest corporate tax rates in the world. At a rate of 35%, corporations of all sizes are suffering. Corporate taxes consume the part of revenue that  could otherwise be spent on research and development, more efficient technology, and on job creation. In direct relation to operations management, Laura Tyson, a contributer to Business Insider, says that “corporate-tax expenditures narrow the base, raise the cost of tax compliance, and distort decisions about investment projects, how to finance them, what form of business organization to adopt, and where to produce” (2). And when project costs go up, the burden indirectly falls on consumers and shareholders: “American workers, consumers and shareholders bear the greatest part of the cost of higher corporate rates and a complex tax system because it ultimately can raise product prices and lower investment and growth in the United States” (3).

Finally, on February 12, 2013, President Obama asked Congress to increase minimum wage to $9. This proposal sparked negative outcries from all across the country because at a time when people are asking, ‘Where are the jobs?’ why would you want to make it harder for small employers to hire people? (4). Raising the minimum wage simply reduces the availability of entry-level positions across all industries. “The minimum wage is a learning wage, the first rung on many workers’ career ladders. A higher minimum wage saws off this rung” (4). By raising the minimum wage, high school students, college students, and disadvantaged adults will suffer not only monetarily, but also they will have less chances of learning valuable disciplines like getting to work on time and  interacting with customers. This can only negatively impact future business environments.

All in all, we can conclude that our current government is slow at trying to build a better foundation for small businesses. If they cannot act more quickly, the economy’s recovery will stall and there will be increasingly less work and productivity in America.

 

Works Cited

(1) http://www.foxnews.com/opinion/2012/03/28/too-many-rules-are-killing-america/

(2) http://articles.businessinsider.com/2012-05-04/markets/31567901_1_corporate-tax-rate-tax-code-special-tax-provisions#ixzz2QVMBZqrl

(3) http://money.cnn.com/2007/07/26/pf/taxes/business_tax_conference/

(4) http://www.huffingtonpost.com/2013/02/14/obama-minimum-wage-republicans_n_2680397.html