A new poll suggests New Jersey residents don't want to be charged sales tax when they make online purchases, but the head of a state retailers' group says doing so would be the quickest — and fairest — way for the state to enforce tax laws.
"Although a sales tax on Internet purchases would result in higher revenue for the state, Garden Staters feel their overall tax burden is big enough," said Krista Jenkins, executive director of Fairleigh Dickinson University's PublicMind Poll.
The poll asked 945 residents if the added state revenue that would come from a sales tax on Internet purchases is worth the burden to consumers. Fifty-four percent said it wasn't worth the burden. Thirty-three percent said it was.
John Holub, president of the New Jersey Retail Merchants Association, said he's not surprised people would be against a new tax, but he said the issue in this case isn't a new tax, but rather how to more effectively collect existing taxes.
New Jersey already charges a 7 percent use tax on Internet purchases, which residents are supposed to pay when they file their income tax each year. The problem is only a tiny percentage of residents actually do so. Holub said making retailers collect the tax up front wouldn't constitute a new tax, just a more effective and fair way of levying the existing tax.
"A sale is a sale and a tax is owed (on Internet purchases), unfortunately, these online retailers are making the consumer a tax deadbeat," he said.
Holub argued that if poll respondents were asked a different question — such as whether it should be the retailer's responsibility or the purchaser's responsibility to collect and pay sales taxes — most people would side with his group and say the retailer should collect the tax.
Holub said the issue for local retailers has never been about collecting revenue for the state, but rather about the competitive advantage out-of-state online retailers enjoy because they don't have to charge the same taxes as brick-and-mortar stores.
Joseph Seneca, an economist at the Rutgers University Bloustein School of Planning and Public Policy, said lawmakers in Washington D.C. should step up to address the issue.
"The solution here is a national solution for Congress to act and make this a national policy," he said. "Unfortunately, there's little prospect of that in the near future, so the individual states are left to address this."
Earlier this year, New Jersey inked a deal with Internet behemoth Amazon under which the retailer will begin collecting sales tax on purchases by New Jersey residents beginning in 2013. Amazon also said it would build two new distribution centers here.
Seneca said other states, including Texas and California, have also taken action independently. He said barriers to national action include pushback from major online vendors, and the sheer complexity of the issue, since different states have different tax rates and apply the sales tax to different types of purchases.
Holub said he would like to see a state address the issue, because he said that's likely the quickest way to get retailers to start collecting the tax. However, he said Amazon's voluntary decision to collect sales taxes took some steam out of the momentum to find a state solution. He thinks a federal solution is forthcoming, just likely not before the November election.
"All this is, is a modernization of our tax law," he said. "Unfortunately, the tax law doesn't reflect the 21st Century marketplace."
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