The Thin Edge of the Wedge
Posted On: 2008-04-15
For a long time now various state and federal governments around the world have been looking at ways of making money from all those juicy sales that are going on via the Net. Just think of it from the politician's point of view for a moment; there they are reading about billions of dollars worth of sales happening on the Net and they can't get their cut. That must be about as close to torture that these guys get.
All that additional revenue that they could have to waste and it's just slipping through their fingers like grains of sand. I guess it was no wonder that sooner or later someone in some state or national capital would decide that enough was enough ... and now they have.
The New York state legislature has passed a new bill that will require online retailers located outside of the state to collect sales tax on goods they sell to people who live in New York State. Of course those stand-up guys in the legislature wouldn't want you to think that it's all about them ... of course it's not.
According to them this new law is all about leveling the playing field so that online retailers outside of the state can't sell things more cheaply than retailers who conduct their business inside the state. Unfortunately for those stand-up guys the retailers inside the state don't agree with the tax either and are quick to suggest that it's really just another way for the state government to get their hands on some much-needed dollars to support their big-spending ways.
And this is just the thin edge of the wedge because if one state does it then you can bet that just about every other state is going to want to do the same ... and before long it's going to spread to overseas online retailers too. While this new law is called the 'Amazon Tax' you can bet that it's going to apply to just about everything that you ... or your sponsors ... may want to sell to residents of New York State.
Here in Australia goods and services sold by Australian online businesses to people or businesses that reside or operate within Australia do attract a tax but at least it's the same amount - 10 percent - regardless of which state you're selling to or from. Just imagine the problems that will arise in a situation where there are many different sales tax percentages.
And then there's an interesting situation that comes to mind. The last time I bought a book from Amazon I went to their website and completed the transaction but the book - although written by an American for the American market - was shipped from Germany. So which part of Amazon actually made the sale and would they currently be exempt from sales tax if they could point to an overseas branch of the company as the part of the company that actually made the sale?
Some experts suggest that the Amazon Tax is going to be challenged in court so it will be interesting to see whether it actually comes into force ... but even if it doesn't it's a sure bet that sooner rather than later some government somewhere will come up with a way to tax online sales no matter where they originate or where the goods or services are shipped to ... and no matter what those goods or services might be.
Doing business overseas
As you may or may not know Steve and I are heavily involved in mainstream online business too and we both run a couple of small online shops. Over the last few weeks we've been looking at sourcing some of the goods we sell directly from overseas, rather than buying through local wholesalers, and we've been amazed at the way the manufacturers and wholesalers in some of the Asian countries are doing business.
If you've got some spare time head over to alibaba.com and have a look around. It's an online portal for businesses in China and the range of goods that you can buy from there is astounding. There's everything from heavy trucks to toys, computers to USB sticks and the way they go about selling through the portal is amazing.
They have their own instant messaging system, alerts for businesses that want to buy specific items and alerts for businesses that want to sell specific items too and it all happens very quickly. It's all strictly wholesale too so, for many items listed there, you have to be prepared to buy in bulk but the competition is amazing.
On Sunday Steve posted a message to say that we were interested in buying a small quantity of a very specific item. Nothing happened on Sunday because all the businesses were closed but by close of business Monday he had been contacted by around 50 different suppliers and they all wanted to do business. One or two were obviously spam but the rest were legitimate sellers.
It was an interesting exercise to test the waters and the response just blew us away. Now I wonder if there are some lessons there for us here in adult.
There's another crazy day ahead for both Steve and me so I'm off to get stuck into it. I'll see you all tomorrow.