Joplin Takes Action on E-Fairness

This blog post was first published on CitiesSpeak, the official blog of the National League of Cities. It is repurposed here with their permission. Click here to read the original piece.

People in Jopjoplin_efairness_bloglin, Mo., know how to adapt to change.

Our city got its start in 1873 as a mining boom town, and we’ve been growing and changing ever since. We’ve seen Bonnie and Clyde, built our Main Street around historic Route 66, and became a diverse, developed city with a beautiful network of parks and museums.

However, what we’re probably best known for is our resilience in the face of one of the worst tornadoes ever to hit the United States. On May 24, 2011, Joplin was hit by a Category X tornado that destroyed much of our town and cost 161 lives in just minutes. But our local government, businesses, and residents all pulled together in the immediate aftermath of that storm to recover, and we’ve been growing ever since. When 553 businesses were destroyed or severely damaged in the wake of the 2011 storm, we responded by rebuilding 500 of them – and opening 150 more new ones!

Our local businesses are the backbone of our city, and that’s why it’s so important to me personally to close the online sales tax loophole. I’m not just a city council member – I spend most of my time running a restaurant, and I’ve always been an entrepreneur. I understand the role local businesses play in a community.

While no city can afford to leave resources on the table, it’s been particularly important for Joplin to invest in the development and services our residents need, and to have a strong local economy. We’ve got a 7.825% sales tax rate in Joplin, which supports not only our efforts to rebuild, but also our work to invest in our roads and water system, and build our city for the 21st century.

But that’s also a 7.825% unfair disadvantage our local stores face against online sellers, who aren’t collecting that sales tax, and who are luring shoppers away from our downtown. Statewide, Missouri loses out on almost half a billion dollars in uncollected sales taxes.

That’s why this month I brought together a group of people in Joplin to push for a solution: e-fairness legislation. I invited our U.S. Representative and our U.S. Senators to join members of the Joplin City Council and the Joplin Chamber of Commerce to talk about how the online sales tax loophole is hurting our city, and what to do about it.

One of our senators, Senator Roy Blunt, has long been a supporter of e-fairness, and is a sponsor of the current Marketplace Fairness Act in the Senate. We appreciate his continued efforts on behalf of the residents and businesses in Joplin, and we’re looking forward to working with him to see this effort through to the finish line.

A group of ten people, including me, our mayor, city staff, and several local retailers met with representatives of our congressional delegation on August 20 to talk about e-fairness in our community. It was a valuable opportunity for our legislators to hear how the online sales tax loophole is specifically affecting Joplin.

For instance, one store owner observed that deliberate avoidance of sales taxes was changing the way that people shop. People are ordering large purchases online to avoid paying dozens or even hundreds of dollars in sales tax on that purchase. That means that the stores in our downtown and our mall see less foot traffic, and have fewer opportunities to make even small sales.

Leadership from our local mall also pointed out that harm to individual retailers in the mall has an even bigger snowball effect on our community. The mall’s financial contribution to Joplin includes not only the impact of the sales taxes its stores collect, but also the hundreds of people employed there, and the property tax the mall pays.

Our city manager, also helped our legislators understand how passing e-fairness legislation would impact our city finances. We’ve been fortunate to have steadily increasing sales tax revenue in Joplin from the growth we’ve experienced as a community. However, we also rely on a use tax on large purchases, such as vehicles, which we need city voters to renew. If e-fairness legislation passed, and we were able to recover some of that uncollected sales tax, we might be able to streamline our system of taxes and fees, and maybe remove some of the existing taxes or fees we currently collect.

While e-fairness is not a new tax, it is up to community leaders to educate their residents about the current unfair system, and what the sales tax revenues in their communities support. While most people don’t want to pay more taxes, we do want roads free of potholes, working sewers, safe sidewalks, and emergency response services.

We also know that times are changing. Most of us shop online because it is convenient. Even with e-fairness, we know that more people will shop online every year. Our retailers are not afraid to adapt to a world in which we can order anything with the click of a mouse. We’re just asking Congress to close this online sales tax loophole, and enable us to have a fair shot in the future.

If you haven’t already, reach out to your legislators. Find out if they support e-fairness, and start a dialogue with your business community. You know they have a lot to say! If you need help, the staff at the National League of Cities can get you started.

Together, I truly believe that we can change minds and make a difference.

Melodee Colbert-Kean is a councilmember from Joplin, Mo., and currently serves as NLC’s 1st Vice President.

Working to Get it Right: Efairness for Small Businesses

photo 1Potomac River Running first opened for business in the spring of 2003. Two young families with a passion for running wanted to create a resource for runners in the Northern Virginia region, so they banded together and opened two shops to serve their communities. Twelve years on, the company has eight doors and the passion for delivering great customer service to thousands of runners remains the foundation of our business.  During this same time period the evolution of the internet has forever changed the landscape of retail, but areas remain where the internet alone is insufficient.

Ever since the first specialty running store opened its doors, businesses like ours have helped solve problems on an individual basis.  With studies placing the running injury rate on an annual basis between 40-56% for each runner, sitting down with a customer to discuss injuries, goals, running background and other factors is a critical step to ensuring that the footwear being selected by an individual matches their unique needs.

From a mechanical perspective, everyone is built slightly differently, and as a result, has different needs. Is your foot slightly narrower in the heel than average?  Do your arches flex significantly when full body weight is applied?  Is there rotation in your tibia & fibula when you run, and if so, to what degree?  All of these are questions that the internet can provide answers to in general terms, but there is still significant guesswork involved.  Our stores, and stores like ours, make it a priority that all staff are not only capable of answering these questions, but the ones that the consumer might not be aware to ask. In the analysis of recording someone running, the conversation about history and goals, the process of narrowing down the correct shoe size and type, we offer something that simply cannot be achieved by navigating a website.

Given that our process is our product, we always work to get it right, even if that means the customer has to try out a pair of shoes for a run or two before they know for sure that the shoe is for them.  We take pride in helping people, and our stores and many like ours give back to the local community by sponsoring youth track events, hosting races, offering training programs and free group runs.

We often have folks come in, spend half an hour with our staff and then leave with the intent of buying online to avoid paying sales tax. There is room for both local retail and online in the running community, but incentivizing the use of one over the other by allowing a loophole in tax law to remain is unfair to small businesses, as well as to customers. Congress has an opportunity to put local and online businesses on equal footing with the recently introduced Remote Transactions Parity Act of 2015, which closes the online sales tax loophole by requiring online retailers to collect sales tax.  Small businesses run an economic race against other businesses every day – it’s not fair to let online competitors have a head start.

If you are in the Washington, D.C.,-Northern Virginia area, stop in and check out our store. You will be offered excellent service, excellent products, and you will also find us proudly supporting efairness in our windows.

Home Is More Than a House: Supporting the Businesses that Make Up Your Community

lButler4539When you are asked by a new acquaintance where you’re from, what do you think of? Do you think of your childhood home? A fond family memory? Your teenage hangouts? For most people, it’s a combination of all these and more. A person’s home includes every aspect of their community, including the local businesses. They provide each community with a unique character, something you can’t find anywhere else. A community without a vibrant local business presence lacks cohesion; simply put, local businesses hold a community together.

As the head of my local chamber of commerce, I witness brick-and-mortar retailers in action every day. Early morning gathering places like Bluestem Bistro and Daylight Donuts help Manhattanites wake up with fresh coffee and sweet donuts, the local news playing in the background as people start their day by checking in with their friends before work. After preparing for the day, many people go to work atthese local businesses. From selling running equipment at Manhattan Running Company to catching a showing of Rent at the Manhattan Arts Center, local businesses in Manhattan provide jobs for our friends, family and neighbors. When we have a question about a new product or service, we go to the closest experts available: the people who run our local businesses.

The economic benefit of small businesses cannot be understated, either. Local businesses bring money into a community’s economy, support our families and help raise funds for charities and nonprofits. Local businesses also provide stability for communities when larger companies move their operations. I’m proud to say that nine out of ten Manhattan Chamber members are small to mid-size, local businesses.

However, many of our local businesses have taken a hit due as a result of our outdated sales tax framework. My members routinely voice their complaints that customers visit their stores, look a product over and then leave to buy it for less online because online-only sellers are not required to collect the sales tax. I am a firm supporter of a free market – and that means all businesses need to compete on a level playing field. Businesses in Manhattan and all across the Sunflower State and across America are more than happy to compete on price, inventory, quality and service. But they cannot compete on sales tax.

I urge our Congressman, Tim Huelskamp and the rest of the Kansas congressional delegation to support the Remote Transactions Parity Act (RTPA) of 2015. RTPA closes the online sales tax loophole, but more importantly, it levels the playing field for small businesses in communities across the country. And that is a good thing.

Lyle Butler is the CEO/President of the Manhattan Area Chamber of Commerce.

Local Sales Tax Supports our Community Events and Amenities

John StrongLast weekend many families like mine celebrated the Fourth of July in our local community by watching the annual parade and fireworks, attending community-sponsored concerts and events, or hosting their own BBQs.  I couldn’t help but think about all the logistics, time and money that go into planning a day celebrating our great nation’s independence. As an owner of an 80-year-old family-owned small business, Economy Plumbing Supply Co. in Indianapolis, I understand that the sales tax I collect from my customers at the point of sale supports my town. The annual Fourth of July parade logistics, the road closures and even the fireworks are paid for by sales tax revenue collected by local retailers like me. And these events are managed and protected by our first responders who work long hours and are often understaffed and under-supplied due to local budget cuts. I feel honored to contribute to my town, but an outdated sales tax system threatens not only my business, but our entire community.

Today, local brick-and-mortar retailers like me are suffering from a severe disadvantage that is threatening our ability to compete in today’s marketplace. Our current sales tax laws are strictly enforced on brick-and-mortar small businesses like mine, while online-only sellers – often selling the same products to the same consumers – are not required to collect sales tax at point of sale. The sales tax burden falls on the consumer to remit his or her sales tax directly to the state if the online retailer doesn’t collect it. This transaction rarely happens, and as a result, our local communities lose much needed revenue.

Did you know that the sales tax revenue collected by local small business owners like me provides jobs for our first responders? Firefighters, medics and police officers’ salaries are all paid by revenue collected from sales tax. These important first responders keep our communities safe, and our local residents protected. It is critical that we continue to protect their jobs.

Sales tax revenue also supports community organizations and charities, helps to maintain roads- keeping our cities and towns vibrant, and helps us fund community events, like the yearly Fourth of July festivities. In order for our communities to continue to thrive and flourish, local small business owners need a fair and level playing field to compete, which in turn, supports our first responders and community organizations.

Right now Congress has the ideal opportunity to protect small business owners, first responders and local communities by passing recently introduced efairness legislation – the Remote Transactions Parity Act of 2015 (RTPA). I encourage Congress to allow our local communities to continue to be protected by our essential first responders, and enjoy the services they provide us.

John Strong is the President of Economy Plumbing Supply Co. and the Chairman of the American Supply Association.

It’s more about protecting a false competitive advantage than difficulty in collecting sales tax

LanceMuzslay_and_KarenSeymour PhotoAs a small specialty retailer in Arizona, we put tremendous effort into connecting with and supporting our community. We have very knowledgeable staff who love to help runners and walkers determine which shoes work best for them, troubleshoot overuse injuries and train optimally for running events. We have been recognized as one of the top specialty running stores in the country the past 3 years. We are happy to compete against other stores, both online and brick-and-mortar, on the basis of service, convenience and price. However, there is one thing which we are legally prohibited from competing on: sales tax collection.

As a brick-and-mortar business we are required to collect sales tax on all purchases in our stores, and that averages over 8% in Arizona. When an Arizona resident purchases the same merchandise from an online retailer located outside of the state, sales tax is not collected.  As the manufacturers’ prices are usually identical across competing stores, and shipping for running shoes is virtually always free, the only difference in bottom line cost between our store and our online competitors is the sales tax. For a $120 running shoe, the total sales tax ends up being about $10 which is enough to motivate many customers to shop online instead of at a local store. That effective discount enjoyed by our competitors is essentially mandated by current law.

We have found that a customer can stand in our store, order shoes on their smartphone from an online competitor and pay 8% less than the law allows us to charge even though the list price is identical in our store. If this were a 100 meter running race, it would be equivalent to allowing some runners to start eight meters ahead of their competitors. When the marketplace is distorted by laws that give one group of businesses an advantage over competing businesses, that is the epitome of unfairness and it’s long overdue to be rectified. This issue has nothing to do with brick-and-mortar retailers complaining about competitors that sell products at lower prices. This is all about existing law which mandates that brick- and-mortar retailers collect taxes while their online competitors have no such requirement. Local retailers just want the government to stop distorting the marketplace with unequally applied sales tax laws.

Even though we are primarily a brick-and-mortar business, we have had an online store since we opened eight years ago. The most common complaint I’ve heard from online retailers is that requiring them to collect sales taxes would be too difficult and costly because there are thousands of different sales tax jurisdictions around the country with differing rates. Such complaints are vastly exaggerated. An excellent analogy to calculating and collecting sales tax is calculating and charging shipping rates. Most online stores offer various shipping options which involve more variables than sales tax does. For example, shipping cost is determined by weight, shipping address, method of shipment, box size and other variables. Due to its complexity the calculation is often done by integrating the website directly with the computer systems of the shipper such as FedEx, UPS and the United States Post Office. The same basic technology would be used in the calculation of sales taxes. Opponents of efairness legislation often make it sound as if online sellers would need to manually look up the rate for each transaction. They don’t need to do that for calculating shipping rates and won’t need to do it for sales taxes thanks to modern software and computer capabilities, which ironically enough is the very foundation on which they built their businesses.

Opponents of efairness legislation claim that modifying their websites is an enormous challenge. Yes, there is an element of truth there, but to be an ecommerce business by its very nature requires the ability to upgrade a website as technologies change and evolve. For example, just a few years ago there wasn’t very much emphasis on making websites adaptable to viewing on smartphones and tablets. With the growth of those technologies, being able to adapt an ecommerce website is essential. In fact it’s now so critical that on April 21, 2015 Google started penalizing non-mobile friendly websites in their search results rankings. That is a deadly penalty to pay for an online retailer that is unwilling to evolve their website. It’s not uncommon for an online store to do a complete makeover of their site and migrate to a completely different platform in order to keep up with evolving technology.

In 2013, we went through the migration process ourselves as we realized our old platform was incapable of becoming truly mobile friendly. One of the criteria in selecting a new platform was that it be capable of integrating with sales tax collection services so that we would be prepared when such a law goes into effect. Any online retailer that makes a platform change or has done so in recent years while ignoring this facet is woefully naive. If a small brick-and-mortar retailer (such as us) with limited resources and a one person IT department can plan for an eventual remote sales tax collection requirement, then so can the more sophisticated online stores.

Online businesses claim that implementation of efairness legislation would cause them significant harm. On the contrary, brick-and-mortar businesses have already been placed at a disadvantage for many years as the government subsidized discount scheme enjoyed by online stores has unfairly encouraged consumers to shift more of their shopping away from community stores. Local stores simply want a fair shot at competing with their online competitors based on service, convenience and price. To refer back to the 100 meter dash analogy, we’re asking to have our competitors stand on the same starting line so that we can have a fair competition in the retail marketplace. Let the strongest businesses prevail based on their own merits, not on an outdated tax system.

Lance Muzslay is the co-owner of Sole Sports Running Zone in Tempe, AZ.

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