Philly Deals: States move to collect sales taxes on the Internet

General Motors vice chairman Steve J. Girsky says his company is profitable, and he is trying to create a central leadership. JOHN F. MARTIN / GM
General Motors vice chairman Steve J. Girsky says his company is profitable, and he is trying to create a central leadership. JOHN F. MARTIN / GM
Posted: June 28, 2012

The days when Americans could avoid state sales taxes by buying online from Amazon.com are growing short. "By the end of 2012, five additional states will force Internet sellers to collect taxes:" Texas and Utah in July, Pennsylvania and California in September, and Georgia in October, says analyst David Strasser of Janney Capital Markets in a report to clients.

New York and at least seven other states already have Internet tax collection requirements. New Jersey and five more plan to begin collecting, starting next year.

"These changes could ultimately cut a 6%-9% pricing advantage from Internet-only retailers," adds Strasser. "Our discussion with private online retailers has indicated that online sales slow by as much as 10% after a state starts collecting sales tax."

But analyst Shawn Milne, also at Janney, projects only a "slight shift in the mix of online sales to traditional retailers." More important are "convenience and selection," especially the rapidly growing practice of shopping by smartphone; remaining barriers include the online shipping fees that Amazon and others impose on casual shoppers.

Amazon is nearly in position to replace the shrinking U.S. Postal Service with its own Amazon next-day or even same-day deliveries. The company had 61 warehouses in 10 states (including 5 in Pennsylvania's Allentown-to-Chambersburg warehouse belt) at the end of 2011, and plans 15 more this year (including its second Delaware site).

Still in recovery

Was the Bush-Obama General Motors Corp. bailout "one of the great turnarounds in American business history," as Wharton School management Prof. Michael Useem says?

Or is it too early to celebrate?

With GM's (32 percent U.S. taxpayer-owned) shares slipping back below $20 (from $39 early last year), the electric Volt and European sales losing money, the job's still not done, admits vice chairman Stephen Girsky. But the fact that GM overall is profitable, still in business, and employing a growing workforce of over 200,000 is, he says, sufficient justification: "Failure would have been catastrophic." Instead, "we earned $8 billion last year" and expect to stay profitable.

Girsky won his million-dollar-plus-per-year job through an unlikely route: He was a stock analyst at Morgan Stanley covering GM and its more-profitable rivals, cheering its shutdowns and layoffs, in the 1990s and early 2000s. Later, as an auto consultant, he was United Autoworkers' union head Ron Gettelfinger's pick to serve on the GM board as it veered toward bankruptcy and near-collapse; he got along well with GM's new boss, Dan Akerson; in 2010 he was named vice chairman-corporate strategy and development, responsible for product planning, purchasing, supply chain, European division Adam Opel, and wireless communications wing OnStar, among other businesses.

What's he learned? "We operate in a complex ecosystem: outside suppliers, internal engineering," investors, lenders, "and, yes, labor. And the customer in the middle. If anything gets out of balance, our ability to support the customer is disrupted." This happened as GM retiree benefit costs swelled as its labor force shrank through the 1990s and 2000s.

The larger problem: "When your market share goes from 50 percent to 20 percent, someone is not taking care of the customer," Girsky said. GM prospered from the 1920s to the 1960s — the years it was controlled by Wilmington's DuPont Co. (still a major GM supplier), before the government forced DuPont to sell. From that point until it ran out of cash in 2008, GM seemed to lack a cohesive central leadership. Girsky's team is trying to change that: combining venture investments with R&D; rewarding engineers for innovations that make it to the factory, not just for taking out patents; celebrating Volt for bringing in ex-BMW buyers; designing a Cadillac full of wireless media connections.

I ask if he's worried that most young people aren't buying cars (or houses, or cable TV) these days. "Yes," he says. But GM, broadly, "is in the mobility business," and he's open to building other kinds of transportation (as GM has in the past), if that's where the market moves.

Contact Joseph N. DiStefano at 215-854-5194, JoeD@phillynews.com or @PhillyJoeD on Twitter.

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