A federal moratorium on taxing Internet transactions is giving online pharmacies a competitive advantage over many veterinary practices, according to the AVMA, which has adopted a policy that supports allowing states to collect sales taxes on online purchases by out-of-state customers.
The new policy was approved at the June 5-7 AVMA Executive Board meeting and reads as follows:
AVMA Policy on Internet Sales Tax
The AVMA believes that individual states should be able to collect sales taxes for goods sold over the Internet to out-of-state customers.
Congress has prohibited state and local governments from levying sales taxes on Internet access and certain forms of electronic commerce since the late 1990s. Lawmakers have since extended the law three times, most recently with the Internet Tax Freedom Act Amendments Act of 2007, which continued the sales tax moratorium through Nov. 1, 2014.
The AVMA State Advocacy Committee proposed the Association's new policy because the federal law puts "bricks and mortar" merchants at a competitive disadvantage compared with online retailers, who can charge less for the same products.
The committee explained in its recommendation to the Executive Board that veterinary clinics in many states selling drugs on-site must charge sales tax, while Internet pharmacies can sell the same drugs across state lines at a cheaper price because they aren't subject to the same tax requirements.
This price advantage for online retailers ranges from 4 to 9.75 percent, depending on state and local sales tax laws, according to the committee. "Veterinarians are thus becoming less able to compete with Internet pharmacies and are losing out on potential revenue," the committee wrote.
For Dr. Richard Sullivan, owner of a five-doctor small animal practice in Torrance, Calif., ending the moratorium is a matter of fairness. "It's about leveling the playing field," said Dr. Sullivan, who is also a member of the State Advocacy Committee. "I have no problems competing with any other form of veterinary medicine as long as we're on the same playing field."
The AVMA committee also noted in its recommendation that states expect to see a continual decline in sales tax revenue as more residents purchase products online from out-of-state vendors. The lost revenue is greatly needed by state governments during the current economic recession, the committee added.
Additionally, the AVMA committee recommended the Executive Board support legislation aimed at repealing the federal exemption on taxing Internet sales across state lines.