Local retailers – the lifeblood of local communities – may be on their way to getting a deserved break from the federal government.
The U.S. Senate advanced legislation last week that would impose local sales taxes on purchases made over the Internet. A final Senate vote on the measure is scheduled for May 6. If approved by the Senate and the U.S. House and signed into law, the action would put local retailers on an equal footing with giant Internet retailers who have no “brick-and-mortar” presence in the communities where their customers live.
Under current law, states can only require online retailers to collect sales taxes if the merchant has a physical facility, such as a store or warehouse, in the state. So Kansans, for example, pay sales taxes on their Amazon purchases because the retailer has a huge warehouse in Coffeyville, but residents of other states may not. Many online sales are tax-free, to the dismay of competing merchants who maintain physical stores, and have all the expenses that go with them, including charging and collecting sales taxes! The same dismay has been expressed by governors, both Republican and Democrat, who have pressed their case to Congress for years, trying to get authority to collect sales tax on online purchases.
Proponents of the legislation say it’s a matter of fairness. Plus, the revenue lost to local and state governments is significant. The Commerce Department estimates that Internet sales in the country totaled $226 billion last year, costing states an estimated $23 billion because they didn’t get any sales tax from those transactions. Supporters also argue that the measure simply gives states a way to enforce current laws and collect taxes they should be getting in the first place.
Those who oppose the bill (and they include Grover Norquist, the tax foe of all tax foes; the conservative Heritage Foundation; and politicians from states that have no sales tax) argue that it’s a tax increase that will hurt the economy and place more regulations on small retailers who are trying to gain sales via the Internet.
The measure still faces an iffy outcome in the House of Representatives, where the anti-tax cadre holds more sway.
This is a change whose time has come. Congress needs to get this monkey off the backs of struggling local retailers and do away with an unnecessary advantage that fosters e-commerce to the detriment of businesses that invest in local communities across the nation.