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As more states charge sales tax on Internet sales, how does it help your business?

In August, we asked hobby retailers about the growing trend of states passing laws requiring Internet retailers to charge sales tax and how it is affecting their businesses. Here are some of the responses we received. To read more, check out the October 2011 issue of Model Retailer.
Published: August 9, 2011

Denise Eisely at Denise's RC outlet in Barnesville, Pa., had this to say:
At the moment there is no difference in Internet sales. The sales in the shop have declined some, but Internet is about the same. But we just have to starting watching websites that are discounting items so low that we cannot do and hurt all of our businesses and put us all out of business.

Kirby Craford at K/C Hobby in Archdale, N.C., wrote:

At the moment our state does not charge sales tax for Internet sales, but I’m sure that it would increase our walk-in traffic.

Kimberly Miller-Gordon of Turn 4 Hobbies, West Boylston, Mass., said:

So far we haven’t seen any change. We find that people order online out of convenience versus just for price. Everyone has busy lives, and it’s just easier to “point and click” than to fight traffic and get to your local hobby shop to make a purchase.

Scott Thorne, Castle Perilous Games, Carbondale, Ill., responded:

They haven’t yet as far as I understand it. They are passing laws to enforce collection but Amazon and other online retailers are using the “physical nexus” point as a rationale for not collecting. Right now all that is happening is that Amazon is shutting down affiliate sites in states that are pushing to collect the tax (California and Illinois, among others) or moving physical locations out of states that are pushing for the tax collection (Texas) and into states that have pledged not to collect it (South Carolina). If the collection sales tax goes national, it will only help my business as online retailers will no longer get the sales tax discount they receive in addition to not having to invest in a physical location.

Allen Fenton of Al's Trains & Hobby LLC, Bedford, Ohio, says:

I haven’t seen anything so far. It may help in the future. As for me, as long as they keep selling their items at around 10% above my cost it will still be a major problem.

William Romanowski, AAA Hobbies, Magnolia, N.J., wrote:

More people will consider buying at the store now with the equal price points. This should generate more sales.

Gregory Faith, HobbyTown USA, Nashua, N.H., said:

Unfortunately, I do not sell my products over the Internet since the franchise controls my Internet commerce and it would cost me more than it would bring into my business. I would lose money if I participated in e-commerce if I used HobbyTown’s e-commerce method.


Mike Niedzalkoski of Niedzalkoski’s Train Shop in Jeannette, Pa., says:

It’s still too early to see much help. All states would need to charge sales tax to see a big change.

Jeph Coppley, ZNZ Hobbies, Lexington, N.C., wrote:

It would help keep more local business local. I get calls for pricing all the time, and I know when they are looking at a website because they will give me website-exclusive part numbers. I’ll price it for them and then they’ll ask “How much with tax?” which almost all the time means a lost sale. This happens on a regular basis. I can be $20-$30 cheaper and lose the sale because of sales tax. With the margins as little as they are on most big-ticket items, I do not have the wiggle room to eat the tax and make enough profit to justify the sale. I don’t blame people who do this to save money. I’ve done it myself. However, if I would have to pay sales tax on those items I would’ve gone to the local store and buy it that day.

I think with the states trying to find ways to increase their budgets, Internet businesses will see their states require a tax on their sales. The other option is for the state to stop charging sales. Somehow that does not seem likely.

Of course this may only hemp the sales of cheap Asian knockoffs with Hong Kong based websites. I think those products only create headaches for the local hobby shop and discourage future sales.

Rick Chin from Uncle Bill's Hobby, Calgary, Alta., said:

My price is tax-included so in a way the more/less the tax is, the more/less the saving for the customer. I just pay the tax on my own. Customers like that.


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