Lundgren Says States Will Benefit from Online Sales Taxes

Jan 15, 2013 1:31 PM  By

Macy’s president and CEO Terry Lundgren says he doesn’t know when it will happen or how. But ultimately, he believes every consumer – and ecommerce merchant – will have to pay an online sales tax.

“The states are in such (financial) trouble,” Lundgren told a group of reporters during an off-site event held in conjunction with the National Retail Federation Big Show in New York on Monday. “The states are looking for revenue, and they are worried about raising any kind of taxes (on residents).”

Macy’s Inc. saw its December sales grow just 3.6%, its season was saved by its ecommerce growth. Online sales for macys.com and bloomingdales.com combined were up 51.7% in December and 40.4% in 2012 year-to-date compared with the same periods in 2011.

“I’m growing (ecommerce) at 40%, and we have a $2.5 billion business already,” Lundgren said.” But we pay tax on our Internet sales. Pure play merchants don’t. There should be fewer loopholes, there should be fewer exceptions.”

The ones who get hurt the most by the loopholes are small businesses, Lundgren said.

“If they have to compete (with Amazon) on price, they aren’t going to win,” Lundgren said. “And if you can’t keep small businesses in business, that’s where you lose a lot of jobs.”

The 1992 Supreme Court decision Quill Corp. vs. North Dakota said states are not allowed to require out-of-state companies to collect sales taxes unless that company has a physical presence, such as a store or warehouse, in the state.

But in 2011, the U.S. Congress introduced the Marketplace Fairness Act to give states the power to enforce sales tax rules on all online sales – even when the purchaser and seller reside in different states.

Ahead of any regulation, Amazon last year agreed with New Jersey to start collecting sales taxes on purchases made in that state starting July 1 of this year. Amazon announced last week that it would build a 1-million-sq.-ft. warehouse in the township of Robbinsville, which will generate $22 million in annual tax revenue for the town, school district and county.