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February 19, 2018

Trump supports introducing an online sales tax

US President Donald Trump is a strong supporter of a national tax on internet purchases, Treasury Secretary Steve Mnuchin has said.

By Pamela Kokoszka

US President Donald Trump is a strong supporter of a national tax on internet purchases, Treasury Secretary Steve Mnuchin has said.

Speaking to the House Ways and Means Committee, Mnuchin said: “I think the President fundamentally supports the idea of some type of sales tax across the board, and we look forward to working with you and others on that,”

Despite previous comments from Mnuchin suggesting a less firm endorsement from Trump, the Treasury Secretary said the US President ‘does feel strongly’ about introducing an online sales tax.

Last month he told the Senate Banking Committee that there were certain aspects of the tax the president ‘likes a lot’, and is looking forward to working with Congress on a proposal.

The support for an internet sales tax from White House comes ahead of the US Supreme Court revisiting its 1992 ruling which effectively banned the tax for online vendors.

Greg Girard, a  retail analyst at IDC, said: “Just about everyone except self-interested and cost-sensitive consumers and pure-play online retailers see the merits of an online sales tax so long as it’s easily administered—calculated and collected,”

Online sales tax prospect has been a long-standing point of dispute between internet-based retailers and brick-and-mortar stores.

“A uniform national online sales tax system, regardless of nexus, would simplify administration and do a lot to level the playing field,” said Girard.

A nexus refers to whether the retailer has a physical presence, stores or distribution centres in the state or not.

Currently in the US, retailers only have to collect sales tax in states where they have a major physical presence.

Some states have their own laws requiring tax payments from online firms, and calls have been increasing for an update of the national legislation.

Congress’s audit and research agency said that $13 billion was lost in sales tax payments in 2017 from both online and remote sellers.

According to Girard, Amazon sales are subject to tax in many if not most states, given its national network of distribution centres, Whole Foods Market stores and lockers which signify physical presence.

Trump has also previously gone after Internet retailer Amazon saying it does ‘great damage to tax paying retailers’.

While Amazon began collecting sales taxes on purchases in all states that levy them earlier last year, it still avoids charging shoppers sales taxes when they buy from one of its third-party vendors.

Third-party sales make up about half of the company’s volume.

The UK is also facing a discrepancy between Amazon and physical retailers. Late last year, UK retail experts called on the government to revisit the UK tax laws after discovering that Amazon saw a significant cut in business rates while physical retailers were going under due to tax bills.

“If we want to maintain a variety of forms of competitive retail enterprise, from small stores to large big box and department stores serving villages, towns and big cities, we need to ensure that property and company taxes do not consistently penalise physical shops in favour of e-commerce,” Centre for Retail Research’s Professor Joshua Bamfield said.