Tax on net sales - a pertinent issue

Diamond retailers and trade organisations in the U.S. seem eager to have the sales tax leaglised on internet sales. The National Retail Federation (NRF) urged a congressional committee to approve the legislation, by which, internet merchants, mail-order houses and other “remote sellers” would be mandated to collect sales tax across state lines.

According to the 1992 U.S. Supreme Court ruling, remote sellers need to collect sales tax from customers within the states where they have a physical presence such as a store, office or distribution centre.

J.C. Penney vice president and associate general counsel-tax, Wayne Zakrzewski U.S. testified before the House Judiciary Committee during a hearing on H.R. 3396, the Sales Tax Fairness and Simplification Act of 2007. He said “Many of our competitors do not collect, which gives them a competitive advantage. This is not because they are innovative or provide incremental value to the consumer, but because the states do not have the ability to require collection of a tax that is due from the consumer”.

Zakrzewski noted that such negligence has not only hampered the business of local businesses but has burdened the state and local governments to increase other taxes to make up for the lost revenue. He suggested that the committee should level the playing field between sellers that collect sales tax and those who do business on a virtual basis.