Sales tax could add hundreds of dollars to some appliance purchases, but Steve Goedeker doesn’t think collecting it will hurt his business.
His Ballwin-based appliance store, Goedeker’s, does 90 percent of its business online, and a recent Supreme Court ruling will require online retailers to collect sales tax for 45 states and thousands of local governments. Goedeker’s currently collects taxes only in Missouri.
Goedeker’s advertises “no sales tax” right on its home page. Goedeker acknowledges that it makes a difference to price-conscious shoppers, but he also says he’s had to structure his business to avoid having a physical presence in other states.
He can’t offer to install new appliances or haul away old ones. That turns away a lot of customers. If he has to collect sales tax nationwide, Goedeker said, he’ll restructure his business to offer those services.
“We will look for every way to provide the level of service customers want,” he said. “Our prices will still be below those of other mass merchants.”
Updating software to collect the taxes will cause “a little short-term pain,” Goedeker said, “but this is not going to be a death sentence.”
Jimmy Sansone, founder of St. Louis apparel seller The Normal Brand, is also taking the Supreme Court decision in stride. “We don’t think this ruling is going to negatively affect us,” he said. “Online shopping is attractive because it is convenient and reliable, and we don’t think this ruling is going to change that.”
The smallest e-commerce companies may get a break. The South Dakota law that the Supreme Court upheld says businesses with sales of less than $100,000 in the state don’t have to collect sales tax, and Justice Anthony Kennedy cited that exemption as one way the state avoided imposing too much of a compliance burden.
“Kennedy provided a pretty good road map” for how states should structure their sales tax laws, says Alan Viard, a resident scholar at the American Enterprise Institute. “A lot of states will probably try to follow those principles.”
The Government Accountability Office estimates that states and cities are missing out on at least $8.5 billion a year in taxes on online sales. The spigot won’t turn on overnight, though.
Congress could set national standards — but Congress has been dodging the sales-tax issue for 26 years, ever since an earlier Supreme Court case created the physical-presence rule.
In the absence of national standards, each state will have to establish its own rules for online sales.
A few states, including South Dakota, have already passed laws that should force e-tailers to send them money, and 24 states have signed on to a simplification effort called the Streamlined Sales Tax Agreement. Illinois and Missouri have done neither.
A Missouri Department of Revenue spokeswoman didn’t respond to a request for comment about the sales-tax ruling. Richard Sheets, deputy director of the Missouri Municipal League, said he had been told that the department was studying the ruling but that legislative action was probably needed.
If that’s the case, online retailers probably won’t have to collect Missouri sales tax until next summer at the earliest.
Eventually, though, we should get to a point where online sales are taxed just like in-store purchases. Even folks who hate taxes should acknowledge that it’s unfair to treat virtual stores better than physical ones.