Would Ohio do better
by first implementing a sales tax on online out-of-state sales instead of expanding the in-state sales taxes to cover services?
It's a thought some are asking and we are, too.
As shopping has moved online, brick-and-mortar shops in some cases have been reduced to virtual showrooms. Customers view products artfully displayed in stores and then go online to escape the sales tax.
It is estimated that tax revenues lost annually to online sales exceed $11 billion nationally. In 2011, the University of Cincinnati released the results of a study that estimated Ohio's loss by not collecting sales taxes on online sales exceeded $200 million annually. The study also indicated that taxing online sales would create 11,0000 new jobs in retailing in Ohio because the playing field of in-state retailers versus online retailing would be a fairer one.
For sure, not applying a sales tax on out-of-state online sales puts bricks and mortar stores, those we all refer to as Main Street, at a competitive disadvantage.
Because the Interstate Commerce Clause forbids state tariffs, taxing businesses located outside the state is an unclear proposition and most states have limited out-of-state taxation to those companies that maintain some kind of bricks and mortar facilities, usually a warehouse or distribution center, in state.
In recent years, however, bricks and mortar retailers, feeling they are operating at a competitive disadvantage, have been pushing a Marketplace Fairness Act at the federal level that is gaining steam. Amazon, likely to emerge the nation's largest retailer surpassing even Walmart, is now supporting such federal legislation while eBay remains opposed to it.
Regardless of the Act's outcome, Ohio should be scrutinizing possible opportunities to levy its sales tax on those who sell products online to those of us who live in the state. Our neighbor, Indiana, is scheduled to apply such a tax starting January 2014.
Ohio should be looking at such opportunities, too. Doing so might produce enough revenue to enable Gov. John Kasich to reduce the state income tax, his pursued goal, and still keep the level of public services high.
Currently an out of state retailer has to have physical presence in Ohio in order to force them to collect. However, the USE TAX exists for these purposes and the people of Ohio should notice the line on their personal income tax for use tax. For people that buy online, its only a matter of time before the State gets that information provided from the major retailers, and like those who bought cigs online can tell you, people may get an unexpected bill in the mail in the future.
Also, to AMT, the tax is not a new or artificial tax because you should be self assessing use tax if you are not charged sales tax. That has not changed since the 1930's. Why would you want our in-state retailers and innovators to be at a disadvantage?
NO! We don't need tax increases and we don't need artificial regulations on innovative retailers. Let capitalism work. You are the kind of people who back in Thomas Edison's day would have taxed light bulbs in order to preserve the candle industry. This is called progress - become competitive or get out of the marketplace. You stifle the economy when you impose these artificial regulations.