Senate Votes to End Tax Free Shopping On The Internet: Does This Help Rural Communities?

Rural counties have a very difficult task competing with online retailers. E-commerce has had an impact on the erosion of its tax base making it tremendously difficult to meet growing demands. County leadership continues to operate in an environment fueled by citizen discontent for their inability to expand the number of services the community needs and wants to improve its overall livability scale. Attracting retail businesses that the community demands beyond the basics-grocery, fast food, hardware, and general house products, the vision has not been realized.

Yesterday, the US Senate voted to tax online purchases of companies with revenue greater than $1m. With its passage, state and local taxes would be collected. Supporters of the bill include the President along with companies such as Wal-Mart and Amazon. In the past, Amazon was in opposition and now with more brick and mortar stores across the country; it has aligned with the Senate. eBay remains in opposition with others.

However, for way, too long, rural counties have complained of sale taxes that originate at what is referred to as “point of sale.” Such a tax is collected by a retailer from a customer no matter where they are from. In the case of rural communities, the purchase is made by a county resident at the retail shop but the tax revenue collected, stays in the community in which the purchase is made. The rural county does not benefit from the revenue even though the purchase was made by a customer who lives in the county.

Such now is the case with the passage of the Senate Bill yesterday, to collect sales taxes from retailers with both a physical presence in the state and doing over a $1 million dollars in business. Rural communities miss the mark once again. The number of companies in rural places with e-commerce businesses is few. The impact at the local level in rural places, again, will be too limited to consider.

In the absence of competitive markets in rural communities and in particular, those with a history of persistent poverty, their leadership will have to continue to fight for equity of economics on other fronts. Businesses pay taxes.  If there are few businesses, then so the taxes correlate. You have few businesses, and a constituency of low-income residents and a highly aging population makes for a tremendous trial of faith, less the failure is in futility.    

Online purchases from the Internet fill the gap between products and service the community needs and or want, but are not available locally. And, if available, the competitive nature of eBay, Amazon and other online stores, make purchasing local all the more difficult.

Ending tax-free shopping on the Internet will have a tremendous impact on counties and communities with high retail markets and tax accounts already. It will do little for rural communities and in particular, those with high degrees of poverty. The amount of online products to be sold and shopping to be done, and the tools required to make that happen, are limited again, by economics.