Booksellers Group: E-Retailers Should Collect Sales Tax

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The American Booksellers Association is trying to get state and local governments to collect sales tax from online retailers.


"It's a bare-bones, grass-roots effort, which we expect to be countered by the opposite - an expensive lobbying campaign financed by the corporations that benefit from not having to charge or collect sales tax," said Richard Howorth, president of the association.


The group has asked its 3,400 member bookstores to write their state governors, local and state tax authorities, chambers of commerce and newspapers. Howorth himself has written the governors individually, the National Governors' Association, the National Conference of State Legislatures, the U.S. League of Cities, the National Conference of Mayors and the National Association of Counties.


Naming sites such as Amazon.com, barnesandnoble.com and Borders.com in his letters, Howorth said that though these online retailers have no physical stores, they share nexus with Internet companies in other states through links from associate member or affiliate programs.


"By not paying sales tax, e-commerce companies can compete unfairly against community-based businesses," Howorth wrote. "Consequently, more shoppers are driven online because of the unfair price advantage and stores lose business, reducing their payments of sales tax and resulting in major losses for the stores and their communities."


Under the law, consumers are liable to pay sales tax on all purchases, including out-of-state catalog orders. Mail-order firms are required to collect sales tax only in states where they maintain a physical presence.


Internet companies have been treated like mail-order firms in that they pay sales tax in states where they have nexus. Generally, nexus is proved either if the online marketer has a physical presence or conducts a meaningful activity in a state.


What makes this so confusing is that nexus is established on a state-by-state basis, said Avin Mark Domnitz, CEO of the Booksellers Association, Tarrytown, NY.


"The federal moratorium on Internet taxes [for three years through 2001] did not exempt companies that have nexus in any particular state from paying legitimate sales taxes," said Domnitz. "It only put a moratorium on the creation of new taxes and, therefore, in our own industry, Barnes & Noble and Borders, in my opinion, have nexus in every state they have stores and should be paying sales tax [for online sales] in all those states."


Barnes & Noble and its 40-percent-owned barnesandnoble.com, both based in New York, declined comment.


Bill Curry, director of communications at Amazon.com, cited a Supreme Court ruling that said the burden of paying sales tax falls on the customer since state laws were too complex for catalog and direct marketers to collect taxes everywhere.


"It's a free country and [the ABA] will do what they want," said Curry. "The fact of the matter is that people shop online for convenience, for huge selection and great prices, and not because of any sales tax issue."
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