US Supreme Court rules on online sales tax

The US Supreme Court has overturned a ruling that had given online retailers a way of avoiding some state taxes.

NY Times: Supreme Court Clears Way to Collect Sales Tax From Online Retailers

Internet retailers can be required to collect sales taxes in states where they have no physical presence, the Supreme Court ruledon Thursday.

Brick-and-mortar businesses have long complained that they are disadvantaged by having to charge sales taxes while many of their online competitors do not. States have said that they are missing out on tens of billions of dollars in annual revenue under a 1992 Supreme Court ruling that helped spur the rise of internet shopping.

On Thursday, the court overruled that ruling, Quill Corporation v. North Dakota, which had said that the Constitution bars states from requiring businesses to collect sales taxes unless they have a substantial connection to the state.

This could be significant for New Zealand. If internet retailers like Amazon have to comply with all the state taxes in the US (a complex thing) depending on the location of the purchaser,then it should be simple to also comply with tax requirements for other countries.

Writing for the majority in the 5-to-4 ruling, Justice Anthony M. Kennedy said the Quill decision had distorted the nation’s economy and had caused states to lose annual tax revenues between $8 billion and $33 billion.

But there could be a downside. If online retailers are forced to charge more tax in the US they may look for more sales in places where they can get away without charging tax.

Tobacco retailer safety

With the continually rising price of tobacco and cigarettes, and a presumption (mine) that people inclined towards committing crime and those associated with them  also tend to be inclined towards smoking, the number of robberies related to tobacco have increased. These robberies are often violent, and dairy owners and staff  are often the victims.

Dairies can choose whether to stock tobacco products or not, but it is a major source of revenue for the small businesses. Who should be responsible for their safety?

Of course the police have a duty to protect any retailer of legal products from theft and violence – to an extent. They cant be at every dairy all the time.

ACT MP David Seymour is suggesting that the Government direct more of the substantial amount of tax and duties they get from tobacco into paying for retailer safety.

Another suggestion is to admit that escalating taxes and prices have created an unintended consequence, and lowering the taxes would alleviate the theft and violence problem but that is debatable.

Today’s ODT editorial looks at the problem, and comes up with what should have been an obvious answer – tobacco product suppliers should protect their retailers.

ODT: The smoking gun of tobacco taxes

Dairy owners are again starting to worry that the next person who enters their shop may be a thief who could turn violent as he or she demands cash and, increasingly, tobacco products.

A search of media outlets shows a pattern of increasing crime against sellers of tobacco products, as their price has escalated through increased excise taxes.

The New Zealand tobacco industry says it makes a significant contribution to the New Zealand economy in terms of government revenue, retail sales and employment. It pays more than $1.8 billion in total taxes each year.

Tobacco products make their largest financial contribution to the economy in the form of excise taxation. The industry also says tobacco is an important source of revenue for about 5000 New Zealand retailers, the vast majority of whom are small, independent retailers and dairies.

A debate has again broken out about who should pay for the protection of the retailers selling the tobacco products. Fewer outlets are now selling tobacco and communities celebrate the success, believing fewer people are smoking as outlets reduce.

However, aggressive cost-cutting has helped some of the largest tobacco companies retain their profits, despite falling sales.

One of the arguments being made to help protect dairy owners is to just stop selling tobacco, of course ignoring the fact tobacco is a legal product and a genuine part of a service dairy owners can offer their customers. Unless another high-margin product emerges to replace it, dairy owners will still sell tobacco.

Act New Zealand leader David Seymour is at the other end of the spectrum, saying after two violent robberies in less than a week, it is only a matter of time before someone is killed.

The money collected by the Government each year in tobacco tax revenue is blood money, obtained by putting the lives of people at risk, he says.

But Mr Seymour is somewhat off the mark when he calls for the Government to direct 10% of tobacco tax revenue to protect vulnerable business owners.

Surely it is time for the tobacco companies themselves to start protecting the people they want to sell their products? Revenues from global tobacco sales are estimated to be close to $965 billion, generating combined profits for the six largest firms of $67.5 billion.

That’s a good point. If tobacco companies want to protect their sales and profits perhaps they should do more to protect their retailers.