Concern is circulating through the numismatics industry after the Wall Street Journal published a story that the Republican Governors Association supports the collection of sales tax for Internet sales within their state.
The process started earlier this year as governors, looking for a way to close budget gaps, started to consider forcing companies like Amazon.com to collect sales taxes for goods shipped to their states. In February, New Jersey Governor Chris Christie (R) negotiated a deal with Amazon to collect sales taxes for purchases shipped to New Jersey. As part of that deal, Amazon will be opening a warehouse and shipping center in New Jersey.
What was not reported was that the reason Amazon opened a facility in New Jersey was that federal law currently prevents the collection of taxes for sales shipped across state lines for companies that do not have a presence in the state. Since Amazon now has a presence in New Jersey, they can collect sales taxes on purchases. Otherwise, federal law exempts Amazon and any other company selling on the Internet from paying sales taxes to states they have no presence in the state where the item was shipped.
Sales tax on Internet-based purchases will affect everyone that sells online including the eBay seller, coin dealers, auction houses, and bullion sellers. If you sell online, you will have to figure out how to collect sales taxes. While larger companies may have the facilities and resources to collect sales taxes and pay them to the state. The rest will have to work with a service provider to be compliant with the law. Any time a small business has to add new capabilities using an outside service, it will be an additional expense to the small business.
In the numismatics industry, most of the dealers are small businesses. Many work from their homes shipping orders throughout the country while others may work from shops with a local clientele that also provides some Internet sales.
Aside from the administrative overhead to collect taxes, states have different rules for what is taxable and what is not. Some states do not tax bullion sales while other states tax bullion sales, but do not tax them over a certain limit which could be different from state to state. Some states do not tax coin sales while other states do, but when the sales are lower than a threshold, which can change between states.
This will not only hurt numismatic sales, but all small business sales across the Internet.
While Governor Christie and his fellow governors look at Amazon as their fiscal savior, Joe’s Local Coin Shop that may do a few thousand dollars in sales from the Internet now has to figure out how to collect sales taxes for the states or stop taking Internet-based orders, reducing income. Talk about a “job killing tax plan!”
Three bills have been introduced into congress that will end the restrictions to collecting sales taxes on Internet-based sales:
- S. 1452—Main Street Fairness Act and its companion H.R. 2701. Not only will this bill open up the collection sales taxes across state boundaries, but it “asks” the states to create Unified Rules for collecting sales tax.
- H.R. 3179—Marketplace Equity Act: This bill will open cross state sales tax collection but has an exemption for small businesses. To qualify for the small business exemption, the company would have to sell less than $1 million nationwide and less than $100,000 in the state. However, the bill would allow the states to adjust these limits and affecting administrative costs to small businesses.
- S. 1832—Marketplace Fairness Act: Simiar to the Main Street Fairness Act, it has no exemptions for small businesses, but limits the sales tax to goods and services sold while exempting shipping and handling.
Adding these additional administrative burdens to small businesses in the dealer community will close or restrict interstate markets especially for the buyer in rural America who depends on Internet sales to build a collection. There will also be an impact with online auction sites that makes coins available from all over the country. It will drive up costs to run these auctions and drive sellers away.
Time is going to come when states will have to start to collect sales taxes from interstate sales. However, congress has to do its job as a regulator of interstate commerce to protect the small businesses, like coin dealers, from having to manage 50 different sales tax rules.
Contact your member of congress and let them know that if they are going to allow sales tax to be collected from Internet sales, they need to do their job under the commerce clause to prevent this from putting dealers out of business.
To find your member of the House of Representatives, go to house.gov and enter your zip code in the box on the upper right of the page. Follow the instructions to contact your representative.
For the Senate, go to senate.gov and use the pull-down menu at the top right of the page, select your state, press the “Go” button and click on your senator’s web form address and let them know what you think.
The only way to help preserve our ability to continue to buy numismatics via the Internet from any dealer, anywhere!