Shopping online has a lot to offer: an array of retailers, a vast amount of product and brand options, prices that can easily beat most retail store locations, and to top it all off; no sales tax. That of course is continually subject to change as internet retailers grow their market share –and as trending shows they are at a high rate. As expected, state governments are starting to see a slight pinch in income from sales tax as this trend grows. Some 14-15 states now require the addition of sales tax to internet purchases. It looks as though Minnesota may be on the verge of joining in on this trend.
Why add it now
Most state officials did not want to add sales tax to internet sales because there were fears that doing so would isolate Minnesota and hurt its businesses and economy. This issue was seen as a possible effect of being one of the first adopters of the law. But now as larger states such as New York, California, and Illinois have adopted the internet sales tax law it seems that Minnesota’s legislators can move on the rule without running into the issues they once worried about.
Some of the state’s representatives are now worried that by not enacting the law it will give an unfair advantage to online retailers –there is some evidence of this in the retail market as see examples in this article. The fear is that customers will be going into brick and mortar stores, researching their purchases, then going online to buy. Some are saying that adding internet sales tax it will even out the competition between internet and local businesses. See more on this here.
Discounts, taxes, and the difference made
It doesn’t take long to see how online retailers are moving in to beat brick and mortar retailers. For example you can buy a 55” Samsung TV for a base price of $547 on eBay, versus $699 at Best Buy. Before tax is even added the online retailer has the brick and mortar store beat. This raises the question, how will adding online sales tax create an even playing field when the drive towards internet shopping is due to the deep discounts?
Adding taxes to online purchasing seems like a good deal economically for state governments. The loss of income from online sales has clearly made a dent in potential income for many states. It makes sense then that Minnesota representatives would want to find ways to tap into the potential income online sales brings. But, adding this tax isn’t exactly a “fix all.” The issue still remains on how to help the struggling retailers in the state that are losing customers to online sales and deep discounts. Economic development in this case will need more than just an attempt to even things out with across the board tax law. It sees that the state representatives’ reasoning behind how adding an internet sales tax is not necessarily a way to be proactive in driving the economy and local businesses, rather it seems to be a revenue driver for the state.