Texas begins collecting taxes on online sales
Online retailers have a number advantages over their brick-and-mortar counterparts – fewer operational costs because they don't need physical locations, a broader reach as they can engage anyone with an internet connection, etc. However, if there is one critical perk to operating an ecommerce shop, it's the fact that online retailers don't have to charge sales tax in some states.
This has obviously been a point of contention among many state governments and local retailers. Governments don't collect any tax money on these purchases, while brick-and-mortar retailers view it as an unfair advantage because it reduces the amount consumers have to pay. It's a lose-lose situation for both parties, with retailers losing sales to ecommerce merchants and governments losing money from taxes physical retailers would be paying.
As a result, many states are adjusting their laws to begin charging ecommerce shops taxes. Texas is the latest to take action that requires online-only retailers to collect taxes. Beginning July 1, merchants such as Amazon.com will need to charge shoppers sales tax on each purchase.
"A true free market is devoid of government preferences and special treatment," said Sandy Kennedy, president the Retail Industry Leaders Association (RILA), as quoted by RetailingToday. "Texas has made a powerful statement that it's time to end special treatment for online retailers and close the sales tax loophole that gives companies like Amazon an artificial leg up on Main Street retailers."
As many as eight states throughout the country have passed legislation requiring online retailers to collect sales tax and more continue to do so each month. California and Pennsylvania are slated to do so in September, while New Jersey and Virginia recently did this as well.
RILA was quick to suggest that Congress should take action and enforce this nationwide. Physical retail stores bring a lot to the economy, including new jobs, and giving ecommerce storefronts an advantage threatens their existence.
That said, it's paramount that physical retailers also improve store operations to create a better shopping experience. Now that the playing field is evening out, retailers can win over customers by providing an experience they can't get online. Many merchants are integrating new technology in a way that will help them better serve their customers, improving the ease of shopping and convenience dramatically.
