A common lament (usually against Walmart) is that “Mom and Pop” stores have been driven out of business, by mega-stores and heartless corporations. While it’s true that family owned businesses have difficulty competing against the big brick and mortar stores, the same is not true for online stores.
I do a lot of work with ecommerce stores as a freelancer, and I can tell you, “mom and pop” have gotten pretty web savvy over the years. They now compete in niche markets, underserved by the big web retailers. They can build a following loyal customers from around the globe, and earn enough to stay in business. I’ve personally worked with dozens of “family owned” ecommerce stores that are doing well, or at least providing a supplemental income.
That’s one reason why proposals like this worry me. Forcing online retailers to collect and remit sales taxes for all states they sell to would put many of these companies out of business. They simply don’t operate on a scale big enough to support the extra cost of managing this. Even as shopping carts get more sophisticated, the mechanics of keeping up with tax rates at the county level, then remitting the proper tax to each one, is more than a 1-2 person shop can take on. Not to mention that there are now 50+ tax jurisdictions that can decide to “penalize” you if you are late or mess up a form somewhere.
Probably the biggest concern is the increase in cost on online products. Bigger stores can absorb some of the tax cost, or offer lower or free shipping, but small shops would have trouble competing. If the Internet sales tax went through, many of these small retailers would close up – the effort would no longer be worth it anymore. Would the internet collapse? No, not at all, but once again, we’d lose those “mom & pop” shops we all love to visit.