Monday, June 3, 2013

Do Something: Research Taxes

I have a friend in Miami who posted a receipt on Facebook (see it below). He was astonished to find a “homeless tax” on there. I took a look and was also surprised to see it. What in the world is a homeless tax? I had to do an online search to find out more about this tax.

I found out that there is a Homeless and Domestic Violence Tax of 1% that is collected on all food and beverage sales by establishments licensed by the State of Florida to sell alcoholic beverages for consumption on the premises, except for hotels and motels. Businesses that must collect this tax make more than $400,000 in gross receipts annually. Eighty-five percent of the tax receipts go to the Miami-Dade County Homeless Trust. Meanwhile, the remaining fifteen percent goes to Miami-Dade County for domestic violence centers. This tax has been imposed since 1993, and I have never seen it applied on any of my receipts. Clearly, I am not eating at establishments that make more than $400,000. But, I’m okay with that.
What do you think about this tax? Should Florida taxpayers’ money automatically go to these organizations or should taxpayers donate on their own time? What other organizations do you think our tax money should go to?
This tax is affecting Florida residents, but I bumped into another tax that will affect the U.S. The Marketplace Fairness Act, which passed the U.S. Senate in early May, would require online sellers with more than $1 million in annual revenue to collect sales tax on transactions across state lines. This would shift the competitive environment for online retailers and brick-and-mortar stores. Stores with physical locations already collect taxes. And so now, this act would bring online retailers up to par with stores. Without the act, online retailers are only required to collect taxes in states where they have a physical presence with warehouses or sales offices. Of course, many businesses agree with this bill because it levels the playing field. However, this could place undue compliance burdens on small Internet sellers.
Moreover, the e-marketing for online retailers would need to be reevaluated to determine if the strategy in place would still attract customers. If customers now have to pay a tax online, then online shopping no longer has an extra cost saving. It may just push people to go to the store and buy there.
So where is the convenience now? Convenience may need to be redefined. If online retailers focus on fast delivery, then it better be faster than it takes me to go from the store and back to my house with product in hand. That’s just me though.
Online retailers may also need to take a look at pricing to compete in that sphere. The main reason people go on Amazon or eBay is the lower price. Prices may need to be lowered to compensate for the tax and make it worth it for customers to stay at home in their pajamas while doing online shopping, and, most importantly, wait for the product to arrive. It’s all about perceived value.
Can lower pricing encourage customers to shop online rather than go to a physical store? Is the lower price worth the wait? Yet, if prices are reduced, where else would the company cut costs to maintain profits? Will quality be affected?
Nonetheless, I think online retailers would need to approach price-sensitive customers in new ways mostly just in the beginning. Different offers and discounts will help with the transition, but there are so many customers that love hassle free online shopping. The online sales tax won’t affect them much. And some customers will not even know about the tax until getting to the order summary page. I didn’t know about the homeless tax and the online sales tax, but doing a little research goes a long way.
Check out this article to read about how the online sales tax can affect consumers and the online marketplace.

4 comments:

  1. Ethelence, your posted receipt with ‘Homeless Tax’ reminds me of so many hotel receipts I’ve gotten in the past. Look at your last hotel bill and you’ll see a breakdown of the nightly fee, and probably 4 or 5 other taxes that are tacked onto the top of each night. There’s an Occupancy tax for the city, and an occupancy tax for the state. Is my occupancy really causing so much disruption as to result in two different taxes? There’s a tourism tax, which oddly enough goes into the same pocket that just charged me an occupancy tax. We’ve become so accustomed to it but once in a while I wonder, what do all these taxes mean? Why can’t they just lump all of their taxes together and just call it City tax?
    If there is truly nothing we can do to curb the ways of legislators into making taxes which make sense, then, like you said, the only option we have left is to try to market around them. Now the business is on the hook to create better prices, offers, and discounts to counteract the legislation of a couple of numbskulls. Great post…Thanks
    Ray
    Telecomm-N-Sense

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  2. Great blog! I always find different taxes when I look at my receipts. Like your friends, I didn’t know that we had a Homeless and Domestic Violence Tax until I randomly noticed it on one of my receipts a few years ago. The new online tax may be bad for online stores, but I agree that it all depends on what the customer defines as convenience. If the lowest cost is what they want, then this could hurt numerous large online retailers, but if they just enjoy the convenience of not having to drive and search for a product in a mall, then this will not affect the customers quite as much. As long as the online retailers acknowledge that they will have to change their approach and lure their clients in with different promotions and discounts, I believe the online stores will manage to survive.

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  3. Very interesting, Ethelence. I didn't know about the homeless tax either. An as Ray said, there are many different taxes that we hardly notice. Those are usually the ones that don't make much sense when we think about their purpose. Maybe is just another way of politicians to take away our money, although I prefer to think that their intentions are good...

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  4. Really interesting...I had no idea about this kind of tax! Personally, I have no issue with a small portion of my bill going to a good cause, but I can see how many might not like donating to and organization of fund they didn't explicitly consent to. With social services leaving a lot to be desired and lack of funding, I don't mind a small amount of what I pay going to something I would support regardless. Also,I agree that convenience has to be defined. With taxes being implemented on online purchases, I think Amazon will make a big push in marketing their new offerings and conveniences of same day delivery to draw attention away from potentially increasing prices.

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