A Question of Fairness: Years of work to simplify the collection of remote state sales taxes may soon pay off.

AuthorBehlke, Max
PositionREMOTE SALES TAXES

After 16 years as a photojournalist for the Las Vegas Review-Journal, Wayne Kodey finally realized his life's dream when he bought his favorite camera store in Las Vegas in 1995. With the internet still in its infancy and customer service his top priority, Kodey's business thrived. Over time he was able to expand and hire more employees.

As the internet matured, however, the shopping habits of Kodey's price-conscious customers changed. Many spent hours with Kodey's employees, learning how to use various aperture settings, filters and lenses, only to politely thank them for their time then leave to purchase the camera online to avoid the 8 percent sales tax. One brazen shopper even used his phone to buy a camera online before leaving the store.

"The price advantage of 8 percent on a $2,000 camera was $160--a large gap in today's price-conscious environment," Kodey told a Nevada Assembly committee in 2017. Competition from online sellers gradually eroded his customer base, he said, until he finally had to sell his store in 2013.

"Leveling the playing field would have made it possible to continue our business and save those employees their jobs and health benefits," he said.

Similar stories abound. The owner of a baby products store in New York tells of a woman who asked him to show her how to assemble a crib. After an hour with her, he learned that she had already bought the crib online to avoid paying the sales tax and just wanted to learn how to put it together.

Then there's the congressman's wife who owns a wedding dress boutique. She spent hours with a bride-to-be, helping her find the perfect dress, only to have her walk out to buy the same dress online, tax free. A few days later the audacious bride brought the dress into the store for alterations.

Is All This Fair?

These stories raise the question: Why are out-of-state retailers allowed to skirt the state sales tax laws that stores on Main Street must adhere to? It's a question of fairness, as NCSL and many state lawmakers see it, and one that led to South Dakota v. Wayfair, the case the U.S. Supreme Court is scheduled to hear on April 17. At press time, however, the future of the case was uncertain. Congress was debating the idea of including a remote sales tax collection bill in the omnibus budget bill to be considered before March 23. If successful, such legislation would likely end the Supreme Court process on the South Dakota law, and whether that would be better for states is debatable.

Average State Revenue Sources Corporate Income Taxes 5% Motor Vehicle Licenses 3% Other Taxes 7% Property Taxes 2% Sales and Gross Receipts 46%...

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