Andy Grove: Tax Internet Sales

Did You Pay Tax on That Amazon.com Book? ... Is it fair that Internet merchants don't have to pay tax? That's a raging debate within the Internet world, not to mention the brick-and-mortar retail community. So it was a bit of a bombshell when Andy Grove, Chairman of Intel Corp., "told a congressional committee that Internet sales don't deserve exemptions from taxes." And further, that "the technical difficulties of collecting taxes across different jurisdictions are 'not insurmountable.'" (Wall Street Journal, June 7, 2000) Uh-oh. That's a tad embarrassing when both major candidates are scrambling to show how strongly they support a totally tax-free Internet.

But perhaps more intriguing was Bob Tedeschi's E-Commerce Report in the New York Times, June 5, 2000, which reported that sales taxes might not be that important to consumers. First, he documented how different Internet operations took widely varying approaches to the issue. For example, Wal-Mart and Borders are particularly aggressive. "In both cases, their Web sites charge sales tax only in the few states where the companies have actual Internet operations -- even though they allow goods bought on the Web to be returned to all of their stores and even though they promote their sites within the stores."

Other dot-com sites like Kmart's Bluelight.com, which operates as a totally separate business, pay sales tax on all sales. According to Mark Goldstein, Bluelight's CEO, "We don't want to be the lightning rod for holding back revenues. We don't want to do anything that's illegal. And we don't want to alienate the communities where Kmart has stores." Tedeschi then references a recent Jupiter Communications report, which found that "sales tax is less an issue than many retailers may believe. ... When shopping for goods priced $50 or less, only 29 percent ... said they would consider rejecting the purchase if the retailer charged sales tax. That number climbed to 41 percent for goods over $100." ... So look for a lot of political and economic infighting as the cyber world and the real world hammer out a "fair" sales tax policy.

Circo Joins PikeNet... Wow, am I happy to welcome Eileen Circo to PikeNet! Eileen brings strong credentials with over 17 years of experience in corporate real estate consulting, leasing and development, including Spaulding & Slye Colliers and Potomac Capital Investment Corporation. Trained as an architect and with an MBA, both from the University of Virginia, she will participate in all aspects of PikeNet, including Dispatch authorship, corporate briefings, web site development and conference planning. Contact info: Eileen Circo, Managing Director, PikeNet, 223 Duke of Gloucester Street, Annapolis, MD 21401. Tel: (410) 990-1000, Fax: (410) 990-1003. E-mail: ecirco@pikenet.com.

--Peter