Local business owners said Thursday’s U.S. Supreme Court decision allowing states to force sales tax collection on online purchases could be a win for small, local brick-and-mortar stores, but potentially a pain for independent sellers who do most of their business online.
The Supreme Court’s 5-4 decision overturned a previous high court precedent under which businesses were only required to collect sales tax on an online purchase if they had a store, warehouse or other physical presence in the recipient’s state, according to the Associated Press.
Buyers were otherwise expected to claim those sales taxes each year — but most didn’t, the AP reported.
“What they’ve done is take laws that have already existed and found a way to enforce it,” said Michael Thompson, owner of independent body care and aromatics store Unguentarii along Main Avenue in Ashtabula. “I’ve been waiting for that to come down the pike for quite a while.”
Thompson, who also worked for a number of years as an e-commerce consultant, said he feels this development likely won’t have much of an impact on physical or online retail, but is likely a boon for states — many of which claimed to have lost billions of dollars in sales tax revenue a year under the previous ruling, according to the AP.
He said larger online retailers like Amazon and Walmart have long been ready for these rules, and, if independent retailers selling through Amazon also rely on the service for order fulfillment — which trims 25 percent off the transaction — Amazon already handles sales tax remittance, he said.
But for smaller online shops that don’t already have the proper sales tax permits or a system to keep track of them all, it could be a “burden,” he said.
“For people operating e-commerce operations themselves, collecting sales tax then having to remit it to 50 different places — that’s going to be a chore,” Thompson said, adding his store will continue to do its own order fulfillment — for now, at least.
Though there are many systems available to make it simpler, that’s an added cost for those sellers, he said. For example: those who sell through WordPress can use the WooCommerce.com plugin, he said.
“It is the independent merchant like me that has multi-channel selling going on that’s going to have to find ways to navigate it,” he said, while reviewing all the current Amazon listings for his Unguentarii line. “You trade one set of complications for another one.”
For independently owned brick-and-mortar stores, however, Thursday’s decision could “level the playing field.” Harold Cattell, owner of Toy-N-Hobby Headquarters along South Broadway Avenue in Geneva, said he’s been looking forward to these rules for “the longest time.”
Cattell got into the business of selling model trains, airplanes, boats and other hobby goods more than 11 years ago, after his retirement. The store had to sell “something interesting,” and by his account, there wasn’t much competition in the area — “all my competition is the internet,” he said.
The average radio-controlled car could sell for a few hundred dollars he said. He also sells flying drones, which can go for up to $4,000. For a $1,000 RC plane, the sales tax could be between $60 and $75, making an online, tax-free purchase hard to beat.
He said some in-store customers have even taken to haggling for a discount or no tax, which he’s unable to do.
“I know they do it to every small business — ‘is that the best you can do?’” Cattell said. “The margins usually aren’t big enough on this stuff to do that.”
Esther Panzone, who took over her late husband’s sports memorabilia and collectibles shop in the Ashtabula Towne Square — now called Esther’s Sports Cards and Collectibles — said hers and
other specialized or novelty businesses face stiff competition from online markets like eBay.
“eBay kills us,” she said. “eBay tends to cut into our business because everyone looks for a deal and they’re buying on eBay. (The ruling) might help us.
“It’s going to level the playing field if people have to start paying taxes,” she said.
Panzone said she hopes legislators will also look into other, similar e-commerce regulations. Though she has a wholesale buyer’s license, which should allow her to avoid paying sales tax when buying collectible cards through eBay, she finds she’s still getting charged — meaning the card is ultimately taxed twice when she re-sells it at her store, and it’s often rolled into her store’s price.
“They can get expensive,” she said.
She also hopes regulators take a closer look at some eBay sellers whom she believes are getting away with selling online for massive amounts of profit without claiming it come income tax season.