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Analyst To Joly: Take The Lead On Internet Sales Tax

In a rare open letter, retail analyst David Strasser of Janney Capital Markets urged Best Buy president/CEO Hubert Joly to lead the charge on online sales tax collection. 7/23/2014 04:15:00 PM

In a rare open letter, retail analyst David Strasser of Janney Capital Markets urged Best Buy president/CEO Hubert Joly to lead the charge on online sales tax collection.

The issue, he argued, is no longer retailer vs. e-tailer, but the future of the CE business and the health of our economy, as a new wave of Chinese e-commerce platforms threaten to further disrupt the industry with tax-free, factory-direct sales.

“Mr. Joly, it is time a CEO at a big retailer in the U.S. became the public face [against] this nonsensical U.S. sales tax law, and makes the argument about what this poorly designed law does to jobs in this country,” Strasser wrote in an impassioned research note. “Other retailers should thank you for stepping up and putting your name as well as Best Buy’s behind the effort to change these sales tax laws.”

He said the new B-to-B and B-to-C web portals, including Alibaba and DHgate, “will likely not have to collect sales tax, yet all the American job creators like Best Buy, hhgregg, Walmart, Target and even Amazon will collect sales taxes, and absorb this pricing disadvantage.”

What’s more, tech vendors like Apple, Samsung and others could also get hurt, “as cheaper alternatives from companies like DHGate, which sells no-name products such as mobile phones direct from Chinese factories to offset excess capacity (and will market these as the same phone as a Samsung or Apple-branded device), will enjoy the advantage of no sales tax in the U.S.”

For his part, DHGate COO Noah Herschman told TWICE that the main purpose of the platform is to facilitate B-to-B transactions with smaller, non-Foxconn-like Chinese factories. He said the model will benefit small- to mid-size U.S. retailers and independent dealers who can now source low-cost, high-quality products direct from the point of production with easy payment and shipping options.

Regardless of the web portals’ implications, passage of federal legislation granting states and municipalities the right to collect sales tax on transactions with local sellers has been an uphill slog.

The effort, which also has the support of Amazon.com,  inched further along last week when the Senate tacked its year-old Marketplace Fairness Act onto a separate House bill banning taxes on Internet access.

The move was described by political website The Hill as part of a last-ditch effort to push the initiative through before the midterm elections. But unlike the Senate, where the bill passed with bi-partisan support, the House’s GOP leadership is loath to back the measure, which could be construed as an added tax, and key House Judiciary Committee Chairman Bob Goodlatte (R-Va.) believes it’s too complex as written.

Ball’s in your park, Mr. Joly.

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