Tax online sellers to level retail field
Soon, perhaps as early as today, the U.S. Senate will take up debate on the Marketplace Fairness Act, which would require online retailers with annual sales of more than $1 million to collect state and local sales taxes.
There are certainly issues with the legislation. For instance, there are an estimated 9,600 different state and local sales tax jurisdictions. It will no doubt require some specialized software to assess the correct tax rate.
But the fundamental unfairness of online sales is this: If you buy, say, a pair of shoes from an online retailer, you are supposed to pay the state and local sales taxes on your purchase, but almost nobody does. If you go to Grand Junction’s Main Steet or Mesa Mall to buy shoes, the business collects Colorado, Mesa County and Grand Junction sales taxes, so you pay more.
As a result, the local retailer — who provides jobs, pays property taxes and state income taxes, as well as sales taxes, and may contribute to the community in a variety of ways — is at a competitive disadvantage with the big, online business that has a giant out-of-state warehouse and a few computer techs handling purchase orders.
The Marketplace Fairness Act would remedy that fundamental inequity. It would also raise a significant amount of revenue for state and local governments — an estimated $22 billion nationwide — without raising tax rates.
Opponents offer a variety of excuses for why online retailers shouldn’t have to pay local taxes:
✔ They don’t have facilities in every community where purchases are made, so they supposedly don’t contribute to local infrastructure needs. But online retailers rely on local roads, local law enforcement and more to ship products safely to customers.
✔ Having to pay sales taxes may force online retailers to move out of the country to avoid paying taxes. But few experts predict a mass exodus. Security, taxes and access can create just as many problems for retailers in other countries.
✔ Bricks-and-mortar businesses aren’t required to ask out-of-town customers where they’re from and then pay sales taxes to those communities. The difference, of course, is that these businesses pay the taxes in the communities where they’re located and their customers come into those businesses to obtain the products for sale. The customers don’t sit home at their computers and buy products without paying any taxes.
Both Democrats and Republicans are supporting the Marketplace Fairness Act, and some from both parties are opposing it. Not surprisingly, a number of major online retailers, most notably eBay, are fighting the legislation.
However, Amazon, the world’s largest online retailer, is actually supporting it. Perhaps that’s because Amazon already pays sales taxes in a number of states — but not Colorado — under agreement with those states. Or maybe it’s because Amazon has reportedly developed software to handle the complexities of 9,600 different taxing jurisdictions.
With their billions of dollars of sales and massive buying power, large online retailers will still have competitive advantages over small, local businesses. Not paying sales taxes shouldn’t be one of them.