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Opinion: Sales Taxes Outdated In 21st Century

February 15, 2017 Featured, Retail, Taxes Comments Off on Opinion: Sales Taxes Outdated In 21st Century

We order stuff online frequently because it’s convenient to do so, not because we want to save on taxes. Often we’ll order from target.com so we pay the same tax rate we do when we shop at Hampton Village location once per month.  Amazon is the bulk of our online shopping so now we’ll pay 4.225% for Missouri sales tax. Fine.

There are lots of online retailers out there, from 2013:

Using figures from a variety of sources, including Internet Retailer’s Top 500 Guide for 2013 and data from the U.S. Census Bureau, ReferralCandy determined that there are 102,728 e-commerce retailers in the United States that are generating at least $12,000 per year in revenue. That’s a 13.5 percent increase over last year’s findings, which revealed 90,501 online retailers generating the same amount.

Other findings from the study include:

  • 61,728 online retailers generate at least $25k in revenue (up 12.8 percent from the year before)
  • 38,157 e-commerce merchants generate at least $50k in revenue (up 12.3 percent from the year before)
  • 23,587 online merchants generate at least $100k in revenue (up 13.6% from the previous year) (Forbes)

So over 100k retailers should register with every state to be able to collect and report sales taxes?  I looked at three retailers located on Cherokee Street to see how they handle sales taxes on their online shops — they ship to every state:

Firecracker Press

  • Collects 8.7% Missouri & St. Louis sales tax on orders shipped to Missouri customers.
  • Doesn’t collect sales taxes shipped outside Missouri.

Spoked Bikes & Stuff

  • Doesn’t appear to collect sales taxes on any online order, though a tax line appears in the cart.

STL-Style

  • Doesn’t appear to collect sales taxes on any online order, no sales tax line appeared .

More than half of those who voted in the recent non-scientific Sunday Poll support online retailers collecting state sales taxes:

Q:  Agree or disagree: Online retailers, without brick & mortar stores in a state, shouldn’t collect sales taxes in that state.

  • Strongly agree 6 [14.63%]
  • Agree 5 [12.2%]
  • Somewhat agree 1 [2.44%]
  • Neither agree or disagree 1 [2.44%]
  • Somewhat disagree 3 [7.32%]
  • Disagree 9 [21.95%]
  • Strongly disagree 15 [36.59%]
  • Unsure/No Answer 1 [2.44%]

Oh, I bet many thought I was talking only about Amazon. Where is the line drawn in the sand? Is it based on sales shipped to each state? If so, the three small retailers on Cherokee would need to keep track of sales to each state and then begin collecting state sales taxes only when their sales to that state have crossed the threshold?

We pay taxes to receive services from the government(s). How governments collect revenue varies widely, not all collect sales tax:

In 2013, sales and gross receipt taxes nationwide totaled $254.7 billion — a 3.9% increase from the year before — which means Americans spent an average of $806 on sales taxes last year. That’s less than the $309.6 billion, or $979 per American, spent on state income taxes. However, including selective sales taxes, which are levied on goods like gas and cigarettes, Americans actually pay more in sales taxes than they do in state income taxes.

Sales taxes vary widely from state to state. Some states charge no sales tax, while some localities charges as much as 10% when state and local sales taxes are combined. Tennessee, on average, has the highest sales tax at 9.44%.

There are four states with no sales tax: Delaware, Montana, Oregon, and New Hampshire. A fifth, Alaska, has no state-level sales tax but allows municipalities to impose the retail-level tax. As a result, the average sales tax rate in Alaska is 1.69%. 

While 10% of U.S. states impose no sales tax, a much smaller percentage of the population lives in one of these states — only about 2.5%. (Motley Fool)

Let’s not forget the complex sales tax pool in St. Louis County.

I think it may be time to admit sales taxes as a revenue source is outdated by current technology & shopping trends. I’m not suggesting we need lower taxes — but that we need to find a better way to fund local & state government services.

— Steve Patterson

 

Sunday Poll: Should Online Retailers Collect State Sales Taxes?

February 12, 2017 Featured, Retail, Sunday Poll Comments Off on Sunday Poll: Should Online Retailers Collect State Sales Taxes?
Please vote below

As I’ve previously noted, the retail landscape is always changing — big downtown department stores rarely exist anymore — more & more suburban malls struggle. Last month another change was announced:

The collection of state sales tax in Missouri will begin Feb. 1, Amazon spokeswoman Jill Kerr said in an email to the Post-Dispatch. The state sales tax rate in Missouri is 4.225 percent.

Items sold by Seattle-based Amazon.com and its subsidiaries already are subject to sales tax for merchandise shipped to more than 30 states. Amazon will also begin collecting sales tax on Feb. 1 in Mississippi, Rhode Island, South Dakota and Vermont, and in Wyoming in March.

Amazon does not yet have facilities in the state of Missouri, and online retailers aren’t required to collect sales tax where they don’t have a physical presence. Amazon charges sales tax in Illinois, where it has multiple distribution facilities, including in Edwardsville. (Post-Dispatch)

Posts on social media showed disagreement on this issue so I thought it would make a great poll question:

The poll will close at 8pm, results & my thoughts on Wednesday.

— Steve Patterson

 

Readers Like Amazon Prime

December 14, 2016 Featured, Retail Comments Off on Readers Like Amazon Prime
Papa Fabarre's restaurant was in the downtown Famous-Barr for decades, it closed in 2011 when Macy's downsized in a failed effort to remain viable. Macy's closed in 2013
Papa Fabarre’s restaurant was in the downtown Famous-Barr for decades, it closed in 2011 when Macy’s downsized in a failed effort to remain viable. Macy’s closed in 2013

We can’t draw any definitive conclusions from the recent non-scientific Sunday Poll, but it’s clear from other data that Amazon Prime is a hit. From July:

Amazon Prime members now make up more than half the online retailer’s customer base, according to a new study.

Consumer Intelligence Research Partners estimates that Amazon  counts 63 million Prime members among its shoppers—an increase of 19 million from last June. (Fortune)

As I posted Monday, retailing continues to change. A century ago the Sears catalog was a big deal, offering everything you could imagine — including house kits. The Sears mail order catalog began in 1888, Montgomery Ward was earlier: 1872. National & regional retail stores survived the mail order catalog revolution and all the many changes since.  Retailers that survive must adapt & change with the times. Can you imagine a retailer not accepting credit cards? Even ALDI had to change and accept more than just debit cards.

The recent poll results:

Q: Are you currently a paid member of any of the following (check all that apply):

  1. Amazon Prime 24 [36.92%]
  2. Sam’s Club 18 [27.69%]
  3. Costco 12 [18.46%]
  4. Not a member of any 11 [16.92%]
  5. Google Express 0 [0%]
  6. Walmart Shipping Pass 0 [0%]

I’ve been an Amazon Prime member for at least 5 years now. While it costs $99, it allows me to order things without concern for the shipping cost. We order often enough that it is a good value, we occasionally watch videos too. In July 2015 we joined Costco, shopping there once per month since. Last month we got a 16.6 cu ft upright freezer (yes, Energy Star rated) so we’ll be buying even more there.

While Costco is debating the best approach to e-commerce, its competitors are acting fast. Amazon continues to open dozens of warehouses a year to accelerate shipping times. Its Prime membership program may now be Costco’s closest competitor, as Prime offers a number of perks including free two-day shipping for a $99 annual fee. There is significant overlap between Prime and Costco members, but that could change if consumers find themselves shopping on Amazon more than Costco.

Wal-Mart (NYSE: WMT) has also been rapidly expanding its grocery pick-up program, with plans to have about 1,000 kiosks in store parking lots by the end of next year. Management has said the program has been very popular. The company also acquired Jet.com for $3.3 billion to advance its own e-commerce operations.

In addition, Kroger has implemented a similar click-and-collect grocery program that allows customers to order on their phones and pick up in groceries in a store parking lot. (USA Today)

Locally owned retailers will continue to need to stay relevant to survive & thrive.

— Steve Patterson

 

Sunday Poll: Are You Currently A Paid Member Of A Warehouse Club or Online Free Shipping Club?

December 11, 2016 Featured, Retail, Sunday Poll Comments Off on Sunday Poll: Are You Currently A Paid Member Of A Warehouse Club or Online Free Shipping Club?
Please vote below
Please vote below

This is the time of year that many associate with shopping, but we all buy things throughout the year. Warehouse clubs Costco & Sam’s, both started in 1983, have millions of paid members.  You must pay an annual fee to shop at either.

In 2005 Amazon started their paid Prime service, offering “free” 2-day shipping on many items regardless of how small the amount. Paying up front for free shipping throughout the coming year was a new idea in 2005.

Out of curiosity, I’d like to know how many of you are currently paid members — or not. You can also add one not listed.

The poll will close at 8pm. Tomorrow I’ll post more on modern retailing, Wednesday will be the results from this poll along with my thoughts.

— Steve Patterson

 

 

Opinion: Service Workers Rarely Get Holidays Off

November 23, 2016 Featured, Retail Comments Off on Opinion: Service Workers Rarely Get Holidays Off
South County Center is one of four area malls that will be closed Thanksgiving Day, August 2015 photo
South County Center is one of four area malls that will be closed Thanksgiving Day, August 2015 photo

This afternoon we’re driving up to Springfield IL for Thanksgiving with my husband’s family tonight, his uncle has to work tomorrow. Like many service workers, my husband is off this afternoon & tomorrow only because he requested unpaid time off.

Though only a 90-minute drive, we stay overnight in a hotel to avoid a late night drive back to St. Louis. Tomorrow we’ll drive home, grab a casserole dish from our fridge, and head to my 20+ year tradition of a vegetarian Thanksgiving with long-time friends. Though we won’t stop at any malls or traditional retail stores like Target, we will encounter people working on Thanksgiving Day. .

The first people we’ll encounter working on Thanksgiving will be hotel staff — preparing breakfast and working the front desk. We won’t see them, but after we check out, a cleaning crew will get our room ready for the next guests. We may get gas before we leave Springfield — even with pay-at-the-pump someone is working inside. I’ll set the cruise control at the speed limit because the highway patrol will be working. Hospital, fire & EMS crews will also be working, as always.

If we’ve forgotten anything we might stop at a convenience or drug store, where more people will be working. Many of them will reach their jobs via public transit — bus drivers & train operators don’t get holidays off. The airport isn’t closed either.

My point is many people have to work on holidays, cities just don’t shut down completely. This is related to one of the few areas where I strongly disagree with Sen. Bernie Sanders’ push for a federal election holiday.

Big businesses like banks and the white collar jobs at pharmaceutical companies shut down, and all the employees get a day off with pay. Schools and universities shut down, giving teachers and professors time to vote.

But you know what doesn’t shut down for federal holidays? Retail. Restaurants. Hospitals. Smaller businesses that can’t afford to lose a day of revenue, and if they do, they certainly can’t afford to pay people for the time off. (Inc)

Interestingly, in the Sunday Poll nobody voted that retail stores should be open.

Q: Agree or disagree: Brick & mortar retail stores, shopping centers, malls, etc. should be closed on Thanksgiving DayStrongly agree 25 65.79% 65.79%

  • Agree 4 [10.53%]
  • Somewhat agree 2 [5.26%]
  • Neither agree or disagree 5 [13.16%]
  • Somewhat disagree 0 [0%]
  • Disagree 0 [0%]
  • Strongly disagree 0 [0%]
  • Unsure/No Answer 2 [5.26%]

Hopefully everyone who encounters anyone working tomorrow will think about how their day would be impacted if they weren’t working. Don’t get me wrong, I’m not saying retail stores should be open on Thanksgiving.  I’m saying service workers are an under-appreciated part of society.

A friend who works retail will be off tomorrow, his employer will be closed. Unfortunately, he can’t go visit the person he’d like to because he only has the one day off.

— Steve Patterson

 

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