Mail-order retailers and their trade association spent much of Thursday reassuring angry customers that they aren't going to have to pay sales tax on their catalog purchases, at least not any time soon.
The tax scare was triggered by a front-page story in the New York Times on Thursday. As of now, purchases from most out-of-state catalog companies don't include local sales tax. But the New York Times reported that the Direct Marketing Association, which represents catalog retailers, was near an agreement with several states, including Florida, on a voluntary tax collection agreement.
"The Times story was a gross overstatement," said Chet Dalzell, spokesman for the New York-based DMA. "We've been (talking) with the states since 1992. And, yes, we're exploring voluntary tax collection for those companies that want to participate, while leaving assurances in place that other companies could go on as usual."
Under the status quo, states have been largely frustrated in their efforts to force out-of-state mail-order companies to collect sales tax from their customers. Though legally such purchases are subject to the same tax as a purchase in a local department store, a state has no way to force a mail-order company to collect on the state's behalf. States estimated they were losing as much as $3-billion a year in uncollected taxes. Mail-order companies put the amount at about $1.2-billion.
While the DMA admits that it's trying to work out a tentative agreement with the states that might be signed as early as next month, it was quick to say that participation by member retailers would be voluntary. The bottom line: Consumers won't be facing the prospect of paying sales tax on their catalog purchases any time soon.
Though consumers are used to paying sales tax in stores, they don't like the idea of adding it to their catalog purchases, which already carry shipping and handling charges.
In fact, some of the retailers in the DMA, such as Lands' End, were besieged by consumers' calls Thursday after the New York Times story appeared. Whether that led to the backpedaling by the DMA isn't clear. But the flap illustrates what a hot-button issue this is _ and how much it means to consumers' pocketbooks.
The fast-growing mail-order business had sales of about $215-billion last year. Sales taxes range from 2 to 9 percent nationwide; in Tampa Bay, sales tax ranges from 6 to 7 percent.
If out-of-state mail-order companies agreed to collect sales tax on its Tampa Bay area customers, the impact could be sizable. For example, with Pinellas County's 7 percent tax, a $2,799 notebook computer from Dell Computer Corp. would have $195.93 tacked onto the price tag, along with the normal shipping and handling costs of about $80.
But a spokesman for Austin, Texas-based Dell said it has no intention of starting to collect sales taxes, at least not now.
Local mail-order companies also gave thumbs down to the idea of charging sales tax on out-of-state customers.
"I wouldn't like it, actually. It's just something else for our customers to pay," said Brian Collard, owner of Bricol Enterprises, a Palm Harbor business that sells sports memorabilia via mail order. About 98 percent of the company's business is outside the state.
But Collard, like other mail-order retailers, says a sales tax wouldn't hurt business.
"When those people from Florida get their bills (which include the sales tax), I've never heard a complaint on it," he said. He expects out-of-state customers would react the same way.
Still, a sales tax would be a major annoyance for Sue Scott, president of Cadware, a Tampa software developer that sells via mail order.
"I don't think it's right," Scott said. "You will have to know what all the states' sales taxes would be. I don't see a simple solution, really."
She said it might be all right for big catalog companies with the resources to do all the paperwork, "but we are a small business."
On Thursday, leading mail-order companies quickly distanced themselves from the report that they might soon begin collecting sales tax. L.L. Bean said that, though it had been involved in discussions with the states, it had no plans to collect taxes in the foreseeable future.
Charlotte Lacomb, manager of investor and financial relations for Lands' End in Dodgeville, Wisc., said her company is also maintaining the status quo. "Our stance has been that in states where we have no physical presence, payment of sales tax is left up to the individual."
States, meanwhile, are well aware that few individuals pay taxes on mail-order purchases and have been working with the DMA on a voluntary collection system. Under the system, mail-order retailers would charge customers sales tax based on where they live, then the company would remit this tax to the state.
In negotiations so far, the states have agreed to try to simplify the process for mail-order companies by using standardized forms and allowing quarterly, rather than monthly, tax filings. The states have also agreed that companies would have limited liability for customers who fail to pay their tax, and they've agreed to exempt the sales and handling charge from the tax.
In return for taking on the burden of tax collection, the mail-order companies want the right to have a limited presence in a state, exhibiting in trade shows, for example. They also want assurances that states will waive payment of sales taxes from past years.
While a formal agreement between states and mail-order retailers appears to be far off, Florida hasn't wasted time searching for other avenues to capture this revenue. The state has worked out voluntary collection agreements with 43 mail-order companies that netted $21.5-million last year.
The state Department of Revenue also works with the Agriculture Department in searching trucks at the state border. State inspectors review truckers' manifest reports and alert the Revenue Department when it identifies merchandise on which state tax has not been paid.
"Then we contact the consumer and ask them to pay," said Chuck Springston, spokesman for the Department of Revenue. Furniture and computers are among the consumer products most frequently seen coming across the state line from mail-order companies. And unpaid taxes on these items is no small matter. More than $30-million has been netted from both individuals and business through the program over the past four years.
But at least for the foreseeable future, that hit-or-miss method appears to be Florida's best bet at collecting sales tax on purchases from out-of-state retailers.
_ Staff writer Teresa Burney contributed to this report.
What a mail-order tax could cost
If mail-order companies charged sales tax on items sold to customers in other states, those customers could end up with quite a financial hit, depending on the item. Here's a look at how the cost of some popular items would change if Pinellas County's 7 percent sales tax were added. Tax rates in the Tampa Bay area range from 6 to 7 percent.
Item Price sales tax Total
Buttondown oxford dress
shirt from Lands' End $19.50 $1.37 $20.87
166MHz Pentium multimedia
notebook computer from Dell $2,799.00 $195.93 $2,994.93
Computer armoire from
Crate & Barrel $1,499.00 $104.93 $1,603.93
Airfram, by Michael
Crichton, from amazon.com $18.20 $1.27 $19.47
Five pounds of pears from
Harry and David $19.95 $1.40 $21.35
Toshiba four-head VCR
from Consumer Direct
Warehouse $189.00 $13.23 $202.23
Classic Rock Collection
from Time-Life Music $449.70 $31.48 $481.18
Happy Holidays Barbie
from F.A.O. Schwarz $42.99 $3.01 $46.00