Online Shoppers Beware! Internet Might Not Always Be a Tax Haven

The days of tax-free purchases for online shoppers are numbered, feel many experts. A new law in New York has made sales tax mandatory on internet purchases. This has widened the grin on the faces of offline store managers in the state, who expect some internet shoppers to turn their attention and wallets towards them. New York might have just shown the way to other states that are deliberating upon ways to tax online purchases.

Why is the internet still miraculously tax-free? : It isn’t that internet has evaded the hawkish gaze of tax-hungry politicians but they haven’t simply been able to find effective ways to tax online purchases. The problem stems from the internet being nebulous – without any form or bounds. It is difficult for a state to first establish its jurisdiction in cyberspace and then to exercise it without a conflict with other states. The conundrum of multiple taxes on a single online purchase has been difficult for lawmakers to solve. Maybe these states can take a cue from New York.

The current law in New York and its merits: The new rule that took effect on June 1, 2008 makes it mandatory for all online retailers that are present in the state to charge sales tax on online purchases made by New Yorkers. However, before this rule, online retailers that had no offline stores like Amazon didn’t collect sales tax, while major retailers like Wal-Mart with both a physical and web presence charged sales tax even on online sales. The new rule in New York has easily done away with the disparity between the two. And this is one reason why the New York model can be replicated in other states.

Why tax internet purchases? : Just for the very reason any other purchase is taxed. Taxes help us effectively participate in a democracy and are a major source of income for any government. Anyways, democratic rhetoric apart, taxing online sales will create a level playing field between ‘brick and mortar’ stores and online retailers. Online purchases were roughly worth $136 billion in the U.S last year and are growing rapidly. The figures are donning serious proportions and appear very salivating to the taxmen.

Shoppers are not the only whiners: Yes, Shoppers are not the only one’s that are complaining but online retailers are also annoyed with the new laws. Amazon is very annoyed by the sales tax now being levied on internet purchases in New York. In fact this even led the media to dub the new tax the “Amazon Tax”.

You can still afford a toll-free smile: Because most US states still don’t levy such taxes on online purchases and if you are fortunate enough to be living in one of those states you can continue to make hay until the sun shines.