Online sales taxes: The 'loophole' may be closed soon

Bob Ulrich
Posted on May 8, 2014

I recently attended both the New Jersey State Tire Dealers Association and New York Tire Dealers Association. The concerns of their members are pretty much the same.

There seemed to be one issue that trumped them all in the minds of the dealers, however: sales tax on online sales. It is something Al Breese, president and executive director of the New Jersey group, has been advocating for a long time.

According to the National Conference of State Legislatures (NCSL), states lose $23 billion each year because Internet sales are not taxed (five states do not charge sales tax: Alaska, Delaware, Montana, New Hampshire and Oregon). Here's how the NCSL said it affected New Jersey and New York in 2012:

* $413.4 million in estimated sales tax lost revenue for New Jersey.

* $1.767 billion in estimated sales task lost revenue for New York.

New Jersey and New York tire dealers want sales tax on Internet purchases because it levels the playing field. They have to raise the price of a tire accordingly and collect sales taxes, why shouldn't Internet tire providers? The NCSL wants it because it provides states with additional revenue.

There is movement on the legislative front to close what tire dealers think is a loophole. Last year, the United States Senate approved the Marketplace Fairness Act (S. 743).The bill is, in simple terms, attempting to give states the right to charge sales tax on Internet sales.

This is good news for the tire dealers who earn the majority of their revenue in-store. It's great news for the states. These parties are anxiously waiting to hear whether or not the House of Representatives' Judiciary Committee supports the bill.

To read about the issue from the NCSL's point of view, click here.

Tire sales online, at least on the consumer side of things, represent close to 6% of the total passenger and light truck tires sold in the U.S. That isn't the kind of growth envisioned by American Tire Distributors Inc. when it launched in 2008.

At the time, ATD estimated 3% of the tires sold in the U.S. in 2008 would be sold over the Internet. "We think we're going to see even more consumers buying off the Internet," said the company. (The percentage) will grow rapidly in the near future."

The rate of growth has been much slower than that, and I don't see any signs the rate of growth will increase anytime soon.

What are your thoughts on the matter? Do you think Internet tire sales should be taxed? Let us know by leaving a comment!

Related Topics: Al Breese, ATD, New Jersey State Tire Dealers Association, New York Tire Dealers Association

Bob Ulrich Editor
Comments ( 4 )
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  • sred

     | about 5 years ago

    An instructive post. People to really know who they want to reach and why or else, they'll have no way to know what they're trying to achieve. People need to hear this and have it drilled in their brains.. Thanks for sharing this great article. Check for business and tax solution and helps...

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