Frugal Friday: Is the Internet Sales Tax Upon Us?

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Odd eyed cat

Happy Friday everyone! Can you believe that we have made it through another week already? I stumbled upon an article early this week on Yahoo Finance that included an interview with both Warren Buffett and Bill Gates. Gates was in town for the annual Berkshire Hathaway annual meeting and he and Warren are known to be good friends. What stuck out to me about this particular article was one of the topics covered – internet sales tax. I don’t know about you, but I HATE going shopping. And when I say hate, I do not throw around that term loosely. There are few things that I dislike more than shopping. I will do whatever I can to avoid it. I don’t know if it’s the money I am spending, dealing with the crowds or just the fact that I hate malls. Truth be told, it’s likely a combination of all three. My solution, and the one for many for us, is to shop online. I love Amazon or any online store for that matter I can take care of my shopping at any time of the day or night, I can do it from the comfort of my own home and I can usually score a pretty nice savings. Part of that savings is not having to pay for sales tax on internet purchases. While it’s not always a big amount, it usually saves you at least a few dollars with each purchase.

During the interview both Buffett and Gates were asked about their views on the internet sales tax. They were asked, I am assuming, because there is legislation working its way through Congress right now that would require online retailers collect sales tax if they have more than $1 Million in annual sales outside their home state. Not surprisingly, to me at least, both Buffett and Gates said they support the measure as a way to bring fairness to the retail landscape. I’ll be upfront now, I am not certain where I stand on  this proposal and can see it from both vantage points and think both sides have some valid reasoning behind them. On one hand, I know that many brick and mortar retailers have felt the pinch through either showrooming or the inability to match the pricing offered by many online retailers. This, at some level, has impacted jobs as we have seen numerous brick and mortars close down over the last few years. Looking at it from store owners’ perspective, I can understand how they’d feel if they had people walk in their door find something they like and simply walk out because they can get it tax-free plus cheaper on the web. You could argue that they’re seeing this due to an inability to keep up and adapt to the changing marketplace, and that certainly would be correct to a point.

On the other hand, you look at a giant like Amazon and see how they have benefitted from not having to collect sales tax. Not only are they usually cheaper, but you’re also generally able to get your shopping done tax free. It’s great for us as consumers because we get to possibly stretch our budget further and buy more of what we want. However, is it really fair for online retailers to have this advantage…especially considering how many states are suffering from budget shortfalls? Wouldn’t they be able to benefit from consumers having to pay an internet sales tax? Sure they would, but would they manage the influx of funds appropriately…that’s a different question. This brings up an interesting predicament where not only are the rights of the consumer in play, but also the potential for brick and mortar stores to have a fair fight against online retailers. I personally do not think an internet sales tax is a simple cut and dry answer to the “problem.” Eventually, we’ll see online retailers adapt to stay in front of the changing market space. So far as the Frugal Rules household is concerned, we’ll continue to shop online even if the internet sales tax is enacted as convenience trumps the sales tax for us.

Blog Post of the Week

Why I Will Never Regret a Dime Spent on Vacations on The Happy Homeowner

I absolutely loved this post by Jen. It’s likely because I love to travel myself. Jen describes the memories you’re able to create and the experiences you’ll have through traveling the world. Traveling the world is not cheap by any means, but it really comes down to seeing your money as a tool to do what you want to accomplish. Would you rather use that money on stuff that won’t last, or would you rather use it to create experiences that you can take with you for many years. I remember when the travel bug bit me; I was 9 and my parents took us to Europe. I was instantly hooked. If this sounds like something you would like to explore then I encourage you to check out Jen’s post and stick around to see her pictures of Dubai…they’re so breathtaking that I just added Dubai to my list of places to visit.

Other Blog Posts That Ruled

Three Hands and an Action Plan – I’m a Mom on the Go on Canadian Budget Binder

The Dow at 15,000 – Now What? on Thrift Genuity

10 Reasons Why People Cannot get out of Debt on Out of Your Rut

When I Would Rather Spend Than Save on Debt RoundUp

Do You Trust Your Partner With Money? on Monster Piggy Bank

How to Navigate the Financial World after Graduation on The Heavy Purse

Odd Search Terms

Games of Thrones is my favorite show…Maybe you’d like to watch it on a new TV!

Hate being employed but hate being self-employed…Maybe panhandling is in your future

$1 Mother’s Day present…Don’t go overboard now!

Finance to meet festival expenses…Thankfully I’ve paid off my last festival loan

I have left your job…Good, I didn’t like it either!

What can you tell me…I don’t know, I wasn’t paying attention

Criminals working in fast food joints…You’d think you were in a prison cafeteria

Mother’s Day Game of Thrones gifts…Looking for some petrified dragon eggs for your Mother of Dragons, are you?


What are your thoughts? Would you stop buying things online if there was an internet sales tax enacted? Do you have anything fun planned for this weekend?


Photo courtesy of: Ihasb33r

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I'm the founder of Frugal Rules, a Dad, husband and veteran of the financial services industry. I'm passionate about helping people learn from my mistakes so that they can enjoy the freedom that comes from living frugally. I'm also a freelance writer, and regularly contribute to GoBankingRates, Investopedia, Lending Tree and more.

Latest posts by John Schmoll (see all)


  • I am like you, I hate shopping, especially at the mall! My online shopping habits would likely not change much if sales tax was added. I may spend less and hate the tax, but it still beats spending gas, time, energy, etc to go to the brick and motor for purchases. I do see this as something that will most likely be inevitable to level the playing field a bit.

    • John says:

      I agree, that I think it’s inevitable and has a chance to level the playing field a bit for the retailers…though I think the online stores will still likely hold the edge.

  • Thanks for the include this week John 🙂

    I think internet sales tax was always going to happen eventually. There is just too much revenue that governments are missing out on…

    • John says:

      Not a problem Glen.

      I would tend to agree that it has been inevitable for some time now. There is just too much tax money the government is missing out on.

  • Would you stop buying things online if there was an internet sales tax enacted? Do you have anything fun planned for this weekend?

    I would continue to buy online regardless if there is a sales tax or not. I already buy quite a bit of stuff online, but I use both brick and mortar and online stores, so I don’t think my purchasing activity would change.

    I am going to the casino tonight for a friend’s birthday! Here’s to staying in my $60 budget….

    • John says:

      That seems to be the sentiment DC. Ours will not change at all either and while it means we’ll likely spend more the convenience trumps it in my opinion.

      Have fun at the casino, I’ve been wanting to go to one for a while, but will be waiting til my birthday in January.

  • Matt Becker says:

    I’m not educated enough on the subject to have an opinion as to whether an internet sales tax is a good idea. I’m not inherently against raising some taxes, but I do think that simply raising them to allow brick-and-mortar retailers to compete is not the best idea. As soon as you start penalizing efficient parts of the economy and rewarding less efficient parts, you distort things out of your own favor.

    Now, if they’re simply trying to make sure they raise the money they’ve budgeted, that’s a very different question to me, and while I may not agree with all of the spending decisions, I do understand the need to meet their budget.

    I like that travel post as well. Spending money on good experiences is never regretted.

    • John says:

      You bring up a great point Matt and I think that’s the weakest part of their argument…to be fair. Fair?! Since when is business fair?

  • pauline says:

    I hate shopping too. A sales tax sounds fair if it is the tax of the state from where you buy the item, since you could go to that state, buy it and go home. I guess amazon would open a warehouse in a no sales tax state and that would be the end of it.

    • John says:

      It’ll definitely be interesting to see what Amazon does if this does pass. I am sure they have lobbyists trying to fight it.

  • Greg@Thriftgenuity says:

    Thanks for the mention!

    I have a similar view, my gut reaction is I don’t like it, but then I try to reflect on whether it will really help the little guys. One thing I wonder is how do these companies get there supplies? Could there be an additional trickle down? Meaning if a small local company gets materials online, there cost just went up, are they going to pass that on to the consumer?

    • John says:

      Not a problem Greg! That’s a great question to look at. Part of me thinks it might not impact many down the line, but so much of it is interrelated that it would not surprise me.

  • @debtblag says:

    Obviously, I never like paying more, but I can understand the gripes of a local seller who’s competing with someone who already doesn’t have to pay to have a showroom or floor staff, and gets to skip out on sales tax on top of that.

    That said, I am surprised that the sales tax passed the Senate with a surprisingly big bi-partisan margin.

    • John says:

      I agree that I can understand how brick and mortar retailers would feel.

      In regards to Congress…I’ve read that they expected the Senate to pass it with no problem but that there is a pretty staunch group of Republicans in the House that might be able to defeat it.

  • Jose had a great article on the Internet Sales tax that swayed my opinion toward a “yes” vote. Although I’m not a big fan of over taxing, which seems to be the solution that many legislators have as opposed to cutting spending, I can see after reading Jose’s article where it could make sense. Great post, John!

    • John says:

      I did not see his article, so I’ll have to check it out. I am not a fan of being overtaxed either, but I think it’s inevitable.

  • I think internet sales tax is inevitable. I bet medical care and prescriptions will be next, although you’d get more of a fight on that one. I do think it’s only fair that huge giants like Amazon have to pay their share of taxes. It won’t cost them anything other than setting up the process to collect and distribute it from consumers. It does kind of suck for the home based business that is working out of the garage. The small businesses always seem to get the shaft when they have to do the same things as the huge ones.

    I don’t have anything fun planned, but hope my family will take me out to dinner for Mother’s Day.

    • John says:

      I agree that medical care & prescriptions are next and who knows what that’ll do in terms of a fight. I agree that it’ll be the smaller businesses that’ll take the brunt of this as they usually do. Have a Happy Mother’s Day Kim!

    • If they also collect local sales taxes, the cost of setting up the systems is going to be HUGE.

  • I don’t like the internet sales tax because it will cost me more money, but I do understand why local retailers might push for it.

  • Jake Erickson says:

    Dang, an online sales tax would suck, but I guess it’s about time that it came. I don’t think it would change my spending habits, but I definitely wouldn’t enjoy paying the tax that I previously didn’t have to pay for.

    As for this weekend, we’re having my parents over for a Mother’s Day dinner tonight, so that should be fun. Hopefully my family likes the meal we’re cooking because my wife and I aren’t known to be the best cooks.

    • John says:

      I think you’re right on there Jake and think it’s only a matter of time for us.

      Have a great weekend and I am sure your family will enjoy the meal. 🙂

  • GoT is awesome. Nuff said.Thanks for the weekend link reads.

  • I don’t buy much online to begin with, so it wouldn’t affect me very much.

    It sounds easy on paper, but the reality is that the Marketplace Fairness Act is fundamentally unfair. I’m not talking about whether or not internet sales SHOULD be taxed, but the reality of how to implement it. There are 50 states, plus D.C., so it should be easy right? Not really.
    Many states allow municipalities to collect sales tax. I haven’t’ been able to find anything definitive on whether or not local sales taxes would get collected as well. If not, that’s unfair to them.
    If so, good luck charging the right sales tax. That would take a HUGE database of every address in America. You can’t simply go by zip code or city name. I live within the city limits of Fort Collins. If I had a retail location here, I would charge state, county, and city sales taxes. Non-prepared food items are exempt from city tax but still charged state and county tax. Newly legal pot will have a special 25% sales tax rate. My in-laws live less than a quarter mile away but are outside the city limits. No city sales tax at their address. But their address bears the same city and zip code as ours.
    Some states, like NJ only have a state-wide sales tax and bar local sales taxes. But in certain locations, the tax rate is reduced. They are called “Enterprise zones” and are economically depressed areas like Trenton or Burlington where law-makers have dropped the sales tax rate in half in an effort to encourage spending in those areas. One of the requirements of this bill is that states streamline their sales tax laws. But that would require a doubling of sales tax rates in those areas.

    • John says:

      I think you have a point about the issue of actually implementing it. I have been doing some reading on it and the small business owners asked, in general, fear that it’ll just be one giant headache for them…not to mention the time & expense to manage it.

  • The Internet Sales Tax is definitely a hot-button topic in my life right now. I work for a large online retailer and they are all about getting us to write our congressman to fight against it. I happen to think that it is an acceptable way for the guv to increase the tax base. Here’s to hoping they actually spend it wisely!

  • The internet sales tax has been long time coming. It only fair that the playing field be evened out a little.

  • Mackenzie says:

    Okay this is just too funny: “Hate being employed but hate being self-employed…Maybe panhandling is in your future” Ha! John you are too funny 🙂

    I’m undecided on the whole internet sales tax thing, but I have a feeling it is going to happen whether we’re for it or not.

    Have a great weekend! And Happy Mother’s Day to Mrs. Frugal Rules!!!

    • John says:

      Lol! I am glad I could give you a laugh Mackenzie. 🙂 My wife read it and just shook her head as she’s used to my dry wit & sarcasm. 😉

      I go back on forth on it as well, but it is inevitable for what I can tell. You have a great weekend & Happy Mother’s Day to you as well!

  • Thanks for the mention John. I have been following this issue every since I had my own online store. I had to collect sales tax in other states because my distributor was there. The only way this will work is if they make it more streamlined and only have one entity per state that handles the tax transaction.

    One thing that many, many people forget is about USE tax. Many states have it, yet most people don’t pay it. It is the same percentage as the sales tax and it is supposed to be paid by the buyer. This has been a law for decades in order to deal with interstate commerce. If you bought something in another state, but use it in your state, then you are supposed to pay USE tax for your state. This means that you would be double taxed. Once in the state you purchased it and then the USE tax in your state. If sales tax is applied to all states, then the USE tax will become void because the state will get their sales tax.

    • John says:

      Not a problem Grayson. I imagined that you’d likely have a more personal look at this issue going back to your online store days.

      You bring up a great point about the USE tax, I did not even think of it myself. I do know that if there is anyway it can be made difficult and confusing then the IRS will find a way to do it.

  • I understand why States and local brick and mortar stores want the bill passed. The increase in tax revenue should help the govt, but I’m less convinced local stores will see a significant boost. At this point, people are pretty set in their ways and while tax-free shopping was certainly an incentive, it probably was not the biggest incentive for most. I do think it’s inevitable that online sales tax does get enacted and I had read that Amazon was no longer fighting it but now a vocal supporter. They probably have so many warehouses across the country that it’s easier to just tax everyone. 🙂

    Thanks for the shout-out I truly appreciate it! I loved Jen’s post too! Have a wonderful weekend and please spoil Mrs. Frugal Rules this weekend! 🙂

    • John says:

      I can understand as well Shannon and think it’s only inevitable and I think I heard rumblings about the Amazon point.

      You have a wonderful weekend as well and I do plan on spoiling Mrs. Frugal Rules. 🙂

  • I a lot like you where I see the pros and cons of both sides. My shopping habits won’t change at all. It’s more of a convenience thing for me. Around the holidays I do my best to avoid going to the store at pretty much all costs because I absolutely can’t stand being around that many people. When a 30 min trip to the store to pick something up easily turns into an hour or two, I thank Amazon for making my shopping experience faster. I try to avoid showrooming, even at places like Best Buy. It just doesn’t seem right to me to play around with whatever product and get a bit more details about it just to go buy it online. But if I know exactly what I want without needing to go to the store, then I’ll buy online because it’s usually cheaper.

    As far as the weekend, I’m just hoping to be home for it. While it means I don’t get to make money, I luckily haven’t been called back out to work yet. This has been the longest I’ve been off straight in over 2 years and it’s wonderful. Although eventually I’ll have to get back to work.

    • John says:

      I agree JC, it’s all about the convenience and that trumps it for me much more than having to pay a few extra dollars in sales tax.

      Hope you enjoy some well deserved time off this weekend!

  • The Happy Homeowner says:

    Wow, thank you for such an amazing shout out!! I’m in Kauai now, and I will post pictures when I return next week to add to the collection 🙂

    Have an awesome weekend, John!

  • I don’t mind shopping myself as it gets me away from the stuff I have to do at home lol. Internet tax well, that’s inevitable because if there is money to be made online you can bet it will be scooped up in an instant. Thanks for sharing a CBB post mate. Enjoy the weekend with your family.

    • John says:

      You’re exactly right Mr. CBB, if there is money to be made then I am certain the government will find a way to get it. You have a great weekend as well sir!

  • anna says:

    I’ve started to pay sales tax on Amazon and Zappos purchases, and while I dislike it, I respect and understand it…. Cali can use all the help they can get! I still manage to find the lowest prices on Amazon, though, and it’s so much more convenient to have packages waiting for me rather than going to different stores.

    • John says:

      Yea, I had heard that about California. You’re right too…California needs all the help they can get. My mother-in-law works for the County of San Diego and is praying that her pension will still be there when she retires in a couple of years.

  • Brian says:

    I would be pretty annoyed if there was such a sales tax. Shopping online is one of the greatest things about the internet era! Not that I do it a lot, but it still annoys me when certain retailers still don’t offer worldwide shipping. We get the short end of the stick sometimes with US retailers not shipping to Canada.

  • I’m curious to know where the tax collected would go. Would it be disbursed to the communities, states, and provinces from which the customers are purchasing the items, or..where? Amazon and the like have benefited, but maybe too much. I think they will continue to benefit though because of convenience.

    • John says:

      From what I have read, it would just go to the State where you live and they would allocate it however they see fit. Many of the States are in need of more funds, though I am hesitant to think they’ll use it wisely.

  • I’m actually OK with an internet sales tax. Of course I never like paying more, but it is needed to level the playing field between online and B&M retailers. A better option would be taxing neither one, but I think I have a better chance of seeing a sasquatch than that happening.

    • John says:

      I really don’t like to pay much either, but at only a few bucks it’s really no big deal in my opinion. I think it’s actually more of a deal about the tax money coming in for the States as well as the possible compliance issues for smaller businesses as opposed to leveling the playing field. But, like you said, the chances of getting rid of it altogether is as likely as seeing the Loch Ness Monster. 😉

  • funancials says:

    Definitely not surprised on Buffet and Gates’ view on the sales tax. Asking 2 of wealthiest men in the world that have already vouched to giveaway the bulk of their wealth….

    Unfortunately, the internet will continue to become more and more regulated.

    • John says:

      Neither am I, no surprise at all in my opinion.

      I would tend to agree, I think we will see more regulation of the internet as time goes on. It’s sad, but true I believe.

  • Untemplater says:

    I was so mad when Amazon started having to tax California residents on sales. But I just had to get over it. The convenience is worth it and at least they didn’t tax us for many years prior.

  • Hey John,

    I’m going to have to side on the brick and mortar side of the argument. Yes, I love buying cheap but, I hate the concept of my $1.50 is a job lost today. However, I’m not to sure I agree with how this will be rolled out. It’s my understanding that online businesses in Florida will have to charge the Florida sales tax to consumers in Oregon where there is no sales tax. We pay other taxes to make up for it. That said, I would totally support the measure as long as the consumers would have to pay their state taxes and not the taxes of the merchant state. Although, I may be understanding it wrong, what are your thoughts?

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