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McQuiston: Sales Tax

The Sears catalogue, back in the day, was the size of the New York City phone book. When there was a New York City phone book. It had everything from clothing to sporting goods to farm implements. It was awesome. As recently as the 1970s Sears was still so colossal that it was able to build America’s tallest building in Chicago. Now, the company no longer has the catalogue or the skyscraper.

The new retail behemoth is Amazon. It’s a one hundred thirty billion dollar aggregator of online sales that is now dipping its toe into opening brick and mortar stores in key locations. But this has also led Amazon to start charging local sales tax for online purchases, as it did in Vermont last month.

In Vermont, Amazon accounts for about 20 percent of all taxable online purchases. Vermont sales tax revenues are expected to increase about 5 million dollars a year with the Amazon sales tax. Total lost online sales tax is estimated at 25 million. However, what Vermonters, local retailers and elected officials should not expect is for the Amazon tax to reverse the fortunes of local retailers.

Most people shop online now for selection and convenience, not to save money. You can find any item in the world in any size or style by surfing the Web. While that fabulous new electronic gadget is now 6 percent more than it used to be, that little extra cost will only be a disappointment, not a deterrent that will send consumers flooding back to the mall.

The Vermont sales tax is still the state’s second largest revenue source at about 240 million dollars a year, or about a third of the personal income tax. But it’s barely performing up to expectations, unlike the strictly local rooms and meals tax which is doing great.

What Amazon and other online retailers face, in the hope they don’t turn into the next Sears, are more practical concerns: Delivery jams before Christmas; return policies, like those plaguing LL Bean; and virtually unlimited competition.

While people still like to go-out-shopping, which is why Amazon is building stores, the Amazon sales tax will not save the day for local retailers nor for those legislators on the House Ways & Means Committee who decide how much we pay in taxes.

Tim McQuiston is editor of Vermont Business Magazine.
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