Retailers as Unpaid Tax Collectors: Enough Already!!

The debate continues over the "Marketplace Fairness Act". You know, whether sales tax should be levied on internet purchases.

A major issue for retailers, of course, is the administrative burden that would be thrust upon them to remit tax payments to thousands of jurisdictions across the country. That is a tremendous expansion of the retailers' obligation as an unpaid tax collector.

Is it just us, or are the assurances that "free software will be provided to make it easy" seem not all that reassuring? 

One Idea for Easing the Burden

Raymond L. Dever, a retired accountant in Tucson, offered one solution:

"My suggestion would make it the responsibility of a state agency to ensure that these taxes are reported and remitted by their residents.

"Have each state designate one agency to receive once-a-year online submission from each Internet retailer that lists the name and address of every person who made a purchase in that state, the item purchased, and the amount of the purchase. After that submission,the Internet retailer is done." 

We think this is a thoughtful concept. But of course, the retailers still have to compile and report this data. And receive no compensation for providing this service!

Heightens Privacy Issues

Moreover, these suggestions illuminate and magnify privacy concerns: even though the credit card companies and merchants have all this transaction data, how many shoppers want their internet purchases reported item-by-item to a state agency?  

(We will save for another day the discussion of the monetization of shopper data by Amazon, Google, FaceBook, etc, without any recompense for us, the shoppers.)

If the goal – in the interests of fairness – is to collect the taxes at the point-of-sale in order to "protect the consumer's privacy" (that is, not have the information aggregated and reported to public agencies), then retailers should be compensated for providing this "combo service" of tax collecting and privacy protection.  

Another Option: the Credit Card Companies

Here's another option: the credit card companies should be remitting the tax payments directly to the appropriate jurisdictions. 

This is instead of sending those funds back to the retailers, who then must assume the administrative costs of transferring the appropriate amounts to the proper taxing authorities throughout the country.

Saves time, save steps, and just makes more sense!

• They, the credit card companies, already have all the transaction data
• They know where the card holder resides
• They know which items are taxable, and which are not
• They already are distributing funds and keeping records

Say "Yes!" to Fairness...for Retailers!

What do you think? Please let us hear from you.

J.C. Penney Dilemma

Well, What Would YOU Do?!

There's not a more compelling retail dilemma going on right now than the J. C. Penney turnaround. "Will they or will they not survive?!" Surely, 116,000 employees (down from 150,000 a year ago) are anxious to find out.

Before you quickly answer, "Here's what I would do to turnaround Penneys" (everybody's a retail consultant, after all...), consider some facts:

• Brain drain: A high percentage of the best brains have either been fired or decided to quit in the last year;
• Sales have been declining 25% or more for the last six months;
• Gross margin dropped in 2012 to 31.3% from 36% the year before;
• A monster operating loss in 2012 eroded 20.9% of the owners' equity.

Now, let's read their financial status the way it is taught at The Retail Owners Institute:

• The Current Ratio ("the ability to pay vendor bills on time") dropped from 1.8 to 1.4. Hmmm; no wonder they are begging for loans at ANY cost!


• The Debt-to-Worth ratio ("the number one measurement of financial strength") rose from 1.8 to 2.1.  Ahhh; of every three dollars in assets, two dollars are "owned" by OPM, other people's money.


• GMROI (Gross Margin Return on Inventory Investment, the #1 inventory productivity measurement) dropped from $2.13 to $1.74.  Oh my; both profits and cash flow have been hammered.

But, look at a few, but very major, intangibles:

• Mike Ullman, the ex-CEO that the Board brought back, is reputed to have remarkably good relations with key vendors and factors. Question: Can he restore enough confidence that the Back-to-School orders now being placed will get shipped?!!  

• With 1400 stores, there are a huge number of landlords that will do all they can (that's a key word) to prop up Penneys.  

• There may well be some equity in the Penney name and 100+ year history. But, only if the "value" of the name and history as an asset is greater than any "liabilities" associated with the name and heritage; the Balance Sheet MUST balance!   

(For more perspective on JCP's performance compared with the Department Store retail segment, see this Retail Benchmarks page on The ROI site.)

So, if you had a billion dollars sitting around, would you be inclined to loan it to Penneys?!!