TERRE HAUTE — The Terre Haute Best Buy sales associate had spent at least 30 minutes helping a woman select a new iPod Touch. With a screen protector and some other accessories, the sale was going to be for around $500.
Then it happened.
“Oh, wait a minute,” the woman said while standing at the store checkout register. “I can get this online and I don’t have to pay sales tax.”
“[The customer] ended up walking,” said Mike Piotrowski, general manager of Terre Haute’s Best Buy. “She walked, over $35 in sales tax.”
The Best Buy associate had explained to the customer that sales tax, called a 7-percent “use tax” in Indiana, must still be paid by anyone buying products online.
But almost no one pays that tax, state officials admit. In 2010, fewer than 1 percent of those who filed Indiana tax returns paid any “use tax” at all.
In another example, another sales associate at Best Buy worked with a customer purchasing a high-end refrigerator. Best Buy was offering a big discount, but the customer – who had also been shopping online – asked for a little more. She wanted the store to further subtract the amount of the sales tax to fully match a sales-tax-free online price.
“She wanted another $140 off,” Piotrowski said. “If I would have done that, it would have put the refrigerator [sales price] below my cost. I can’t continue to absorb negative margin sales.”
Best Buy takes the Internet sales tax debate seriously. Piotrowski testified in front of the Indiana Commission on State Tax and Financing Policy on Thursday. He joined Dennis May, CEO and president of rival retailer HH Gregg, in asking the state to consider legislation to require online retailers to pay sales taxes.
“I totally enjoy competition,” Piotrowski said. But the lack of a sales tax for online sales means Best Buy and other brick-and-mortar retailers are “at a minimum 7-percent disadvantage” compared with Amazon and other online sellers, he said.
Often shoppers walk into Best Buy, which has 65 employees in Terre Haute, examine products and then go home and buy them online, Piotrowski said. People often also bring products they’ve purchased online to Best Buy for repair advice, he said.
“We’re becoming a showroom for online purchases,” the Best Buy general manager said. “I encourage competition [because] the customer is going to win … but I have to collect sales tax.”