Thursday, May 2, 2013

The Sales Tax Issue

The current issue about placing sales tax requirements on Internet sales will have significant unintended consequences. The loss of such a tax is a true loss to the state involved but the costs are much more than just the tax.

Back a couple of decades ago I saw the complexity up close when we started operating cellular systems here in the States. I had to have complex tax schedules for each state and city and then apply them in a complex manner. The costs associated with that process are quite significant.


1. You must maintain adequate detailed and current tax tables for thousands of various municipalities, not just 50 states.

2. You have to collect and distribute the taxes.

3. You have to account for and audit the process.

4. You have to file local and state forms ad infinitum.

5. You have to deal with complex annual state and local audits in locations which are often near impossible to get to.

By the time you add the staff, the software, the system integration, the accountants, the lawyers, and so forth it may easily increase costs by 5-8% on top of taxes from 4-14%. That is a possible 22% increase to the consumer.

Now I heard some lobbyist from the Retail Industry say that you just get the software and there are no costs. Frankly the woman was clueless, truly clueless. Now that Internet sales are a significant part of our economy just watch what this does!