Internet Sales Tax – Why Not Do The Right Thing?

 

 Updated Feb. 1, 2012

A BNET blogger wrote an opinion piece last year, “The Internet Sales Tax: Will It Help Or Hurt Small Business?” Freelance journalist Mark Henricks presents most of the arguments for and against. As a result of Amazon.com’s political war chest, he concludes the Internet sales tax proposal will fail.

However, from my perspective — even in the Seattle backyard of Amazon.com as a columnist who is also a confidential business-performance consultant – I believe it should come to fruition as a matter of principle.

Mr. Henricks mentions these pro arguments:

• By not paying sales taxes, Internet sellers will lose a 5 percent to 10 percent competitive advantage over bricks-and-mortar retailers.
• Taxing authorities will get $11.4 billion in tax revenue for their beleaguered treasuries (University of Tennessee study).

His con arguments:

• Amazon.com and other Internet sellers argue an Internet tax will be unconstitutional – only the feds can regulate interstate commerce.
• An Internet tax will be too complicated because countless taxing entities tax consumers and businesses differently at varying amounts.
• A tax increase will hurt the economy, and is opposed by 63 percent of Americans. He cites a poll by Rasmussen Reports.

As a passionate free-market businessperson, I can cite countless examples of government waste and dysfunction. Therefore, I generally oppose tax increases. And I’m not opposed to Internet commerce. I encourage it.

However, I support an Internet sales tax for these reasons:

1. The proposal will help pay for abused infrastructure. Internet consumers cause wear-and-tear on freeways and arterials and exacerbate traffic congestion every time they flock to local businesses to check out products, but then go online to make purchases.
2. This means they also increase the cost of fuel for everyone else. Gasoline prices are largely affected by supply and demand.
3. As a question of fairness, Internet purchasers unfairly demoralize and cost small-business owners time and money by shopping at those local retailers, but then disingenuously buy online often to save money or to avoid sales taxes.
4. Currently, Amazon.com and other online companies might be considered monolithic and hindering a competitive environment. Plus, jobs are at stake at all kinds of mom-and-pops in urban and rural America. And don’t forget about the collapse of the nation’s second-largest retailer, Borders.
5. An Internet sales tax is merely a sales-opportunity cost for software and clerical handling — just as brick-and-mortar businesses have sales-opportunity costs in order to collect sales taxes; pay rent; employ workers; and pay an array of state, county, and city business taxes.
6. It is a do-able. Our tax-happy politicians can pass a law in Congress allowing such a tax.
7. Software is already available for collecting Internet sales taxes.
8. My sense is that an Internet sales tax will not be a tax increase. Bricks-and-mortar businesses already have to collect sales taxes while Internet companies like Amazon.com avoid it, with the now-exception of California. This is simply a case of leveling the playing field and a correction of public-policy oversight in the Digital Age.
9. The present situation is also unfair to a significant number of consumers — who live in rural areas without good broadband service, and fixed-income senior citizens who aren’t tech-savvy enough to operate a computer, but who pay their share of sales taxes upon consumption.
10. I’ve overheard Americans brag about avoiding taxes via making purchases on the Internet after eye-balling products at local stores. It’s especially galling by public employees.

Such a tax should be based on the consumers’ locations.

This is a question of fairness. In the final analysis, an Internet sales tax is the right thing to do.

From the Coach’s Corner, this portal’s Marketing/Sales and Tech sections have countless business-coaching tips.

“Taxes, after all, are dues that we pay for the privileges of membership in an organized society.” 

-Franklin D. Roosevelt

 

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Columnist Terry Corbell is also a business-performance consultant and profit professional. Click here to see his management services (many are available online). For a complimentary chat about your business situation or to schedule Terry Corbell as a speaker, why don’t you contact him today?

 

Risk Management – Lawyer Explains Basics in Protecting Intellectual Property

 

Each hour, it seems, news headlines are published about patents. Normally, patent headlines are a sign of business friction as the case with Xerox vs. Google and Yahoo, and Apple vs. Nokia.

So it’s extraordinary for adversaries such as Google and Yahoo to be on the same side. Xerox filed a patent lawsuit naming the two search giants alleging they are violating automatic query and information patents, according to InformationWeek.

It’s also rare when you can spot a positive news headline regarding patents. Note this PC World headline:  “Microsoft, Amazon Strike Patent Licensing Deal.”  This means Microsoft and Amazon.com will each tap into the other company’s technology. As part of the arrangement, Microsoft will receive payments from Amazon.com.

Entrepreneurs are well-advised to consider ways to avoid legal entanglements over their inventions and intellectual property.

Here’s an example: Apple vs. Nokia. In this case, the U.S. International Trade Commission is investigating.

Sounds serious, doesn’t it – it’s time to turn to a noted patent attorney for an explanation of this case.

“It looks like Apple and Nokia are using their patent portfolios to obtain some leverage from each other,” says Adam L.K. Philipp, founder of the Axios Law firm (www.axioslaw.com).  “Generally, two firms of this size may posture, but then settle, especially as their respective patent portfolios are so large.”

He speaks from experience. He says his current clients  include:  “RealNetworks, Wetpaint, PhotoBucket (formerly Ontela), SEOmoz, Appature, Winshuttle, Kashless, HealthUnity, AirSplat.com, and many more.”

China makes a lot of intellectual property headlines. Is China getting a bad rap?

“China is becoming an intellectual property powerhouse; a bit like a very large high college football player.  Young and inexperienced, but having a lot of potential and with the right seasoning has the ability to go to the NFL,” explains the Seattle attorney.

“Generally I tell my clients that it is not enough to have a business partner or intellectual property in China, you want to give your business partner the tools to use by filing for intellectual property protection in China,” adds Mr. Philipp.

He says entrepreneurs face five common problems in intellectual property (IP). They include:

1. Waiting too long to seek IP protection
2. Talking about their technology before securing protection
3. Spending too little money on IP protection
4. Spending too much money on IP protection
5. Spending money on the wrong IP protection

“From a business perspective it is always important to think of intellectual property as providing a business with business tools,” he says. “By simply understanding IP better, businesses can make better decisions on a cost/benefit basis of how or if to proceed with IP protection.”

And he believes patents are needed for five reasons:

1. To obtain exclusivity in their market (barriers to entry for others).  Also to satisfy investors.
2. To obtain licensing revenue
3. For bragging rights (PR)
4. For cross-licensing opportunities
5. All of the above

How about trademarks?

“Securing the investment in a brand and the associated goodwill,” explains Mr. Philipp. “It is expensive and distracting to entrepreneurs and their customers to change a brand.  Registering a trademark can help to avoid that.”

He warns about the importance of copyrights. “Registering copyrights allows a rights hold much easier and cheaper enforcement options.  In particular access to statutory damages that can be quite effective in copyright litigation.”

He’s knowledgeable in the core issues in business-method patents, such as Bilski. Bilski was a decision by the U.S. Court of Appeals for the Federal Circuit and later debated at the U.S. Supreme Court. But the high court’s decision still left questions about what can be patented.

What’s Bilski all about?

“The core issues revolve around the United States’ policy of protecting innovation; and deciding what types of innovations are worthy of patent protection,” Mr. Philipp says. “If is it merely a method of doing business, is that the kind of thing our Founding Fathers really wanted enshrined in the Constitution as protectable?”

Verbiage regarding patents, obviously, is technical, such as the machine or transformation test.

“That a process patent must either be tied to a particular machine or apparatus or must operate to change articles or materials to a ‘different state or thing’,” he explains. “Currently, the U.S. Patent and Trademark Office merely requires a recitation of a particular computer performing the process for software inventions.”

OK, the bottom-line: When does he recommend inventors seek a patent attorney?

“As soon as they decide to build a business around their idea(s),” he concludes. “But that does not mean that they need to start filing for protection right away, rather that they should be informed and strategic about how they allocate their budget.”

Take it from me, pay heed to this information if you want to avoid unnecessary headaches.

From the Coach’s Corner, on a lighter note courtesy of Forbes, here are images of The Kookiest Inventions. (I haven’t verified whether they have made money. )