July 25, 2006, 12:00 AM

Sales tax would hinder the growth of e-retailing, merchant tells Senate

Forcing retailers to collect sales taxes for purchases made over the Internet would be a heavy burden that could hinder the growth of online retailing, Gary Imig, executive vice president of Sierra Trading Post Inc., told the U.S. Senate today.

Sales tax

Forcing retailers to collect sales taxes for purchases made over the Internet would be a heavy burden that could hinder the growth of online retailing, Gary Imig, executive vice president of Sierra Trading Post Inc., said today in written testimony to the U.S. Senate Finance Subcommittee on International Trade.

The subcommittee held a hearing earlier today on SB 2152-the Sales Tax Fairness and Simplification Act. The act would allow states adopting a streamlined sales tax structure to require out-of-state merchants-including online retailers-to collect sales tax on merchandise sold to residents of their states.

Imig said that Sierra Trading Post, No. 196 in the Internet Retailer Top 500 Guide to Retail Web Sites, would interfere with small to mid-size retail web sites’ ability to compete with larger retailers. “The Internet has allowed many of these companies to compete with much larger companies on a level playing field,” he said.

Retailers with stores claim they are at a competitive disadvantage because they must pay sales tax because of their physical locations, while online retailers don’t, Imig said.

“What these interests don’t mention is that we charge shipping, which in most instances is greater than sales tax,” he said. “They know that if we have to charge sales tax up front, we will probably have to cut our shipping charges to make our offerings attractive to the customer. And in this day and age of ever rising fuel charges and postal rates, this will substantially impact our bottom line.”

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