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Monday, June 16, 2014

'Cause I'm the sales-tax man, yeah, I'm the sales-tax man

Here's an economic fact that a lot of conservatives know, and that a lot of liberals don't: the price of a product is largely dependent upon how much it costs the seller to acquire and at some point finally sell said product with all the attendant expenses, labor, rent, electricity, shipping, etc. When you raise the minimum wage, when you require onerous hoops that must be continually jumped through, when you raise taxes on shippers, raise taxes on fuel, and finally when you sic the EPA on a thousand innocent targets per day, the prices of goods and services are necessarily going to increase accordingly.

For example, when the minimum wage goes up, immediately customers begin to see that the increased cost of labor forces businesses to nudge the prices of their goods and services upward. The only exception to this basic economic principle is the normal method of sales tax collection—which is an unfathomably stupid way of doing business in my opinion. The advertised price of the product offered completely ignores the incipient sales tax that will inevitably be charged.

A grocery shopper sees the price of a product and perhaps mentally adds the required six to eleven percent of the sales tax to the running total he's got in his head, but in all likelihood when all his items are finally rung up and the sales tax is added in, the total is going to surprise him. The customer was quoted one price in the store aisles, on the television, in the weekly circular, but none of that matters because in spite of its promises, the store is going to ask for quite a bit more.

Recently there has been quite a bit of chatter about forcing internet retailers to charge sales tax—and lining up like good little ducklings—quite a few, like Amazon have begun doing so. The big box retailers are funneling beaucoup bucks into the wallets of lobbyists and political campaigns in the pursuit of forcing every retailer—regardless of where they live—to begin charging sales tax.
The Marketplace Fairness Act supporters, a/k/a people who want to tax the internet, say it is just fair. Technically, when you buy something online you, the consumer, are supposed to pay the sales tax. But few, if any, actually do. So the geniuses who support the internet tax have come up with a great idea. They will make the businesses in every state keep up with the sales tax regimes of all the other states. They will force the burden of one state’s tax collection schemes onto the businesses of other states.
Can you imagine this! Small time on-line retailers will be expected to calculate the sales tax of their customers for whatever county, city, and state the customer lives in. There are literally thousands of different sales tax rates across the country, and additionally, to make it even more awesomely fun, different goods and services are taxed within each locality at different rates depending on whether it's a food, or beverage, or candy, or a service, or any of hundreds of different mitigating factors.

The big box retailers already have their cash registers programmed for their particular area, but what about on-line mom and pop operations? Not only would they have to collect the correct amounts from whomever, wherever, for whatever, but they'd also be required to pay those amounts to the proper city county and state, along with the requisite forms and paperwork required by each county city and state.

Okay, perhaps the brick and mortar businesses have a point. They say it's not fair and because of sales tax they will lose business to on-line. Don't forget however. that with on-line sales the customer must usually pay shipping fees which can be substantial.

Less thought about but certainly considered when making an online purchase is the uncertainty factor. At a physical store, customers receive the product at the moment they spend their money, and additionally if the product is broken or not what the customer expected, they can almost always return it for a full refund. However, with on-line sales a lot more trust is required, and it's much more difficult and time-consuming if the customer desires a refund. For these reasons, adding sales tax to on-line retail would unfairly tip the desirability balance much more towards brick and mortar.

When you combine the tax accounting nightmare involved, and the decreased desirability of on-line transactions due to shipping costs and the risks involved in actually receiving a satisfactory product on a timely basis through the mail, small-time retailers will be forced out of business.

Now finally we get to the entire point of this entire blog entry. Retailers are scammed by sales tax because they think it doesn't hurt them. They believe it's a tax paid by the buyer. However, customers spend less at their business because they've already factored in the cost of sales tax so it does hurt the retailer. Customers are scammed by sales tax because they don't see the tax reflected in the advertised price, and are often shocked—even dismayed—at the checkout counter.

Taxes should be paid by the party who receives the money not the party who pays the money. When you put the onus of tax debt on the seller instead of the buyer, all of a sudden all these problems are each solved. It won't matter where on earth the buyer comes from. They call it a sales tax not a purchase tax. Why not really make it that way? Make the tax the sellers responsibility and have the seller reflect the cost of tax in the advertised or "sticker" price.

Wouldn't it be great to go to Wendy's for a Junior Cheeseburger and then pay with your only one-dollar bill? You could even tell them they could keep the penny. Why should retailers be shanghaied into becoming tax-enforcers. Isn't running a business hard enough without throwing that responsibility at them? Sales tax as it exists is the stupidest—or perhaps most dishonest—idea bureaucrats have dreamed up...ever.

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