TAXING WORK: Jeff Dronzek, owner of Learn All About It Toys, shows off one his store’s products, the PlasmaCar, to his daughter, Danielle. The Warwick store owner says that online retailers’ ability to avoid sales taxes is an “unfair advantage.”
Jeff Dronzek, owner of Learn All About It Toys in Warwick, doesn’t mind competing with online retailers, but he does get frustrated with “show-rooming,” when customers browse items in his store, get advice from the salespeople, then order them from an Internet retailer.
What makes it worse, Dronzek said, is when the customer is ordering online to avoid state sales tax, which most Internet stores don’t collect.
“It is an unfair advantage for the online retail world,” Dronzek said about the current sales tax practices. “It is something that is supposed to get paid, but no one realizes it.”
So Dronzek has joined with the vast majority of brick-and-mortar retailers and, more surprisingly, a growing number of Internet merchants, supporting a bill in Congress to require sales tax collections of online purchases.
After many years of failed efforts to achieve sales tax equity between online and brick-and-mortar stores, the bill filed last month has support on both sides of the aisle and with a large coalition of retailers, including Internet giant Amazon.com.
Co-sponsored by 53 members of Congress and three-quarters of the Rhode Island delegation, the bill would give states the authority to make retailers collect sales tax on remote transactions, even if the seller has no physical presence in the state.
“This legislation will help ensure that large, Web-based retailers play by the same rules as small businesses in Rhode Island and around the country,” said Sen. Sheldon Whitehouse, D-R.I., a co-sponsor. “Small businesses are the backbone of our economy, and they deserve to compete on an even playing field.”
Compared to its neighbors, Rhode Island has little leverage with online retailers that would convince them to pay state sales tax on items they sell to residents and businesses here. Sales to the nation’s smallest state are never going to put a big dent in a national or international ledger and few online giants need physical facilities within Ocean State borders to conduct their business (having a physical presence, or “nexus,” in a state requires the retailer to collect sales tax for items sold to residents of that state).
Estate and Corporate Income Taxes are changing next year, and business owners and executives should know the details. The PBN Summit on November 6th will provide those details and more - including how much Obamacare's Employer Mandate could cost.
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