Sears Chairman Says Current US E-commerce Tax Rules Are Not Sustainable

by Mike Godfrey, Tax-News.com, Washington

24 February 2010

In his 'Chairman's letter', Sears Holdings Chairman, Edward Lampert, stated that the unbalanced competitive advantage created by E-commerce's failure to collect sales tax meant that the current set of rules would not be "sustainable without severe competitive and community damage over time."

The merger of Sears and Kmart in 2005 expanded the reach of each company, both in physical stores and in mail order and e-commerce, making it America's fourth largest 'broadline' retailer with approximately 3,900 full-line and specialty retail stores in the United States and Canada.

Lampert pointed to the two leaders in online commerce, Amazon.com and eBay, and commended their efforts in building "tremendous businesses over the last decade," but he said that, assuming a 6% sales tax (a rough average of sales taxes across multiple jurisdictions) were applicable to Amazon's annual domestic revenues of USD12.8bn, that would probably amount to almost USD800m in uncollected sales taxes for Amazon alone.

Lampert proposed that there be a leveling of the playing field for e-commerce merchants with all or none collecting taxes. "If state and local governments are going to require retailers like Sears and Kmart to collect sales taxes and not retailers like Amazon.com, they should recognize that over time their sales tax base will erode significantly and that they place companies who have chosen to locate stores locally at a competitive disadvantage", wrote Lampert.

"This will lead to a loss of revenues, the closing of local businesses, the loss of tax revenue, and ultimately to the increase in other types of taxes to compensate for the lost jobs and revenues."

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