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 I feel honored to contribute to my town, but an outdated sales tax system threatens not only my business, but our entire community.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
President, Economy Plumbing Supply Co.
Chairman, 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.

Small Business Owners: Influence Congress to Take Action on Sales Tax Fairness

On June 15th, Congressmen Jason Chaffetz (R-UT) and Steve Womack (R-AR) introduced The Remote Transactions Parity Act. This bill is critical to closing the online sales tax loophole and creating a level playing field for local retailers.  We are thrilled with the leadership they have shown on this issue in the House of Representatives. But, will we see this bill passed? Many Americans understandably have an extremely cynical view of Congress and its ability to get things done. In fact, according to a recent Rasmussen poll, 66% of constituents believe that their elected officials in Congress don’t care what they think.

As a small business owner, you may be one of these Americans. However, as one of the top groups perceived to be giving back to their communities while also achieving the American Dream, small business owners are primed to cultivate relationships with their elected officials and become one of the most influential voices – particularly on sales tax fairness issues.

Are you still unsure that this opportunity exists? In a 2013 study conducted by the Congressional Management Foundation and Society for Human Resources, 95% of U.S. House Representatives said that “staying in touch with constituents” was the most critical component of their job satisfaction and effectiveness. Additionally, the report found that Representatives spend less than 20% of their time on political and campaign work. Still not convinced? In another Congressional Management Foundation study, Congressional staff said that constituents who make the effort to personally communicate with elected officials who are undecided on an issue are more influential than lobbyists or news editors.

So what does this mean? This means that your elected officials are open and willing to hear from you about your position on sales tax fairness and your vital role in the community, if you make the effort. Members of Congress need to hear directly from small business owners about the importance of efairness to job growth, how small retailers strengthen our communities, and the positive impact you make on your local economy. Here are some simple ways you can get involved:

  • Email your member of Congress
  • Tweet your members of Congress
  • Call your members of Congress

 

After you’ve taken action by emailing, tweeting and/or calling your member of Congress, you can continue to show your support for efairness by submitting an opinion editorial or letter to the editor to your local newspaper.  Here are some samples that you can customize:

 

When it comes to government, you can either play in the game or sit on the bench. Either way, Congress will make decisions that impact your business. Don’t let cynicism silence your voice.  Let Congress know that it’s time to support local businesses like yours and pass sales tax fairness legislation.

Online Sales Tax Loophole Presents Unique Challenges for Longtime Family Businesses

Mark WilliamsMy family first opened the doors to Williams Ski & Patio in 1875. We were a pioneer in specialty retail and one of the first ski shops in Chicagoland. Over the past 140 years, six generations of Williams’ have owned and operated the business. Throughout the evolution of our store, we have continually adapted to new products, trends and technologies to maintain relevance and a strong customer base.

T. Williams founded our family business in downtown Chicago in 1875 selling awnings, buggy tops, tents and canvas furniture. Just as the company was celebrating its platinum jubilee (1949) with our 4th generation of Williams’, the business moved to Oak Park, IL and expanded to include outdoor patio furniture. This expansion was the turning point for Williams Ski & Patio, allowing us to become an early pioneer in specialty retail. Nearly 14 years later we expanded again to include a specialty ski shop – one of the first ski shops in Chicagoland.

Over the years we have moved locations, remodeled, added show rooms, opened a warehouse, and re-designed our business model to keep demand high and risk low. From spring to summer we sell outdoor patio furniture and accessories, and from fall to winter we cater to ski equipment and accessories. Because of this adaption of our business to meet the needs of customers seasonally, today we are Chicagoland’s largest ski and outdoor patio furniture store and employee 20-25 people.

Unfortunately, the online tax loophole has created significant challenges for my business.  Although we give customers plenty of reasons why they should buy from us – from our knowledgeable staff to customer service to the vast selection of quality products – potential customers often explain that they would rather buy products online in order to beat the government out of taxes. While most people do understand that they are responsible for paying sales tax for online purchases, they know that there will likely be no consequences if they do not follow through and pay the tax.

I take pride in the fact that Williams Ski & Patio is still family owned and operated, especially considering the devastating impact of the online tax loophole on many family businesses.  Competition in our business is natural and expected, but unfair competition is not. The online sales tax loophole encourages people to cheat on their taxes, making it very difficult for brick-and-mortar shops like mine to stay competitive in the market. While we always strive to offer our customers the best products at the best possible prices, we are required to collect state sales tax. As a result, I have seen many other longtime family businesses forced to shut their doors in recent years as customers increasingly opt to buy products online where they can avoid paying sales tax.

I believe that we should all have to play by the same set of rules. Businesses that are community fixtures –providing services and jobs – shouldn’t lose out on a sale simply because the government makes us collect sales tax but does not enforce this policy with our online-only competition. I support e-fairness as a way to level the playing field that will allow my family business to keep doing what we do best – providing the best possible products for customers’ outdoor needs. My business has a rich family history, and a fair sales tax policy will help to ensure we have a fair chance to thrive for future Williams’ generations.

Complaints About Collecting Sales Tax Are Red Herrings

Simms Fishing in Bozeman, Montana provides fishing products to 550 specialty fly fishing stores throughout the United States as well as larger chain retailers, such as Cabela’s and Bass Pro Shop. Simms Fishing strongly supports efairness because they believe it’s important to the future of their industry. Fly fishing stores provide free lessons, product education and other services to the communities where they are located. If these store go away, so do these services.  When Simms Fishing began selling directly to consumers via their website, the company decided that they wanted it to be on a level playing field with their retailers. Even though Montana doesn’t have sales tax, it was important to them to collect in the states that do. Simms Fishing found that there are several good third party services that make collecting and remitting sales tax from online purchases painless.  The following video features Simms Fishing president, K.C. Walsh, discussing the importance of efairness and the software that makes it possible.

This Tax Season, Don’t Forget Your Use Tax!

jodyheadAs April 15th quickly approaches, Americans are gathering their receipts and paperwork; breaking out the calculator and doing their taxes. For some that means going to visit their accountant, for others downloading the latest tax software or for the traditionalists – filling out their tax forms with pencil and paper.

However you choose to take care of your tax task, there is one item on most state income tax forms that you shouldn’t ignore. In my home state of Illinois it’s Step 8, Line 23 on the personal income tax form: “use tax on internet, mail order, or other out-of-state purchases.” This is where taxpayers need to calculate the amount they owe in state and local sales taxes on the online purchases they made in the previous year.

Many shoppers think they’re getting a better deal when they shop online. Most online retailers are not required to calculate or remit sales and use taxes. This means that their prices are anywhere from 4 – 10% lower than brick and mortar retailers selling the same goods. But the reality is that just because online retailers aren’t required to collect this tax doesn’t mean that consumers aren’t required to pay it. Failure to do so can lead to audits, fines and penalties. That’s why it’s so important to calculate how much you owe for online purchases and not leave that line blank.

With so many states strapped for cash, they’re looking for any opportunity to collect the revenue necessary to operate. Illinois even addresses it on their Frequently Asked Questions page and succinctly highlights why it is so important to pay this tax:

“If you use goods in Illinois that were purchased tax free or at lower rates outside Illinois, you owe use tax to the department. If you do not pay, it is unfair to Illinois retailers, consumers, and taxpayers in the following ways:

  • Illinois retailers, who must charge sales tax, are put at a competitive disadvantage as compared to out-of-state retailers, who charge no sales tax, or charge tax at rates less than Illinois rates.
  • Illinois must make up these lost revenues or curtail state services provided to consumers and taxpayers.”

 

If you go to an accountant, use an electronic tax filing system, or carefully read the tax form instructions there are algorithms that can roughly estimate your state sales tax liability based on your income and online shopping habits. However, if you want to accurately calculate your use tax, there are the steps you can follow. I’m using Chicago, Illinois as my example, but tax rates and laws in your city, county and state will be different.

1. Determine how much you spent online and out of state.

  • For this exercise let’s say that you bought online a $50 pair of running shoes, a $150 digital camera and spent $10 on specialty coffee beans
  • Illinois state law requires you to additionally account for any purchases you bought out of state. For example, if you bought a necklace while on vacation in Atlanta, you paid the 4 percent Georgia sales tax on jewelry. However, by bringing the items back home to Illinois, you owe the 2.25 percent difference in use tax as well.
  • Gather your receipts and tally up your purchases, pay attention because there are some online retailers that do collect sales tax – you shouldn’t include these purchases in your calculations since you’ve already paid

 

2. Determine your state sales tax

  • In Illinois this is 6.25 percent
  • If you live in another state, you can use software like Avalara or TaxCloud to look up your local use tax rates

 

3. Determine any specialty taxes

  • In Illinois, there is an additional 1 percent tax on qualified food, non-prescription drugs and medical appliances that would apply to the specialty coffee beans

 

4. Calculate what you owe

  • For the general purchases, you owe $13.13
  • For the specialty coffee beans, you owe $1.23
  • You would fill in $14.36 on your tax form for your online purchases

 

It doesn’t have to be this hard. If Congress would pass eFairness legislation online retailers would simply collect and remit sales and use taxes for you at the time of purchase. Brick and mortar retailers do this on every purchase already and there are several companies that offer online retailers the ability to fully automate tax collection and remittance, so we know it isn’t too complicated to do. Additionally, this streamlined process would ensure that cities and states governments get the funds they need to operate.

Jody L. Padar, CPA, MST, is the CEO and Principal at New Vision CPA Group and author of The Radical CPA at theradicalcpa.com.

It’s Been a Long Ride for EFairness

bigpoppiSix years ago, we opened Big Poppi Bikes to serve the needs of the cycling community of Manhattan, Kansas. Our store offers everything from kids’ bikes with training wheels and handlebar streamers to BMX stunt bikes to commuter bikes to high end racing machines. But what really sets us apart is our unbelievable service team. From helping you choose the right bike, to making repairs and keeping you safe on the road, our deep knowledge and expertise is why our customers come back time and time again. This kind of service and expert advice is something that you get from a local small business that is unavailable from an online seller.

A new bicycle is a big purchase – costing from a few hundred dollars to a few thousand dollars. We price our bikes competitively and understand that our customers want to save money where they can and are shopping on both quality and price. We like to think that Big Poppi’s knowledgeable staff and expert technicians add extra value to their shopping experience. We are passionate about bicycles and we love helping people pick the right ride, but nothing is more frustrating than when someone showrooms at our store. There have been countless times when customers have visited our store, asked questions about the best bikes for commuting or competitive riding, get fitted for the bike of choice and then walked away to purchase online from an out-of-state remote seller so they can save 8.4% on sales tax. It’s incredibly disappointing to see the very same customers who looked to our knowledge and expertise buy a bicycle online and then come back into the store for repairs and tune ups.

Showrooming ultimately doesn’t just threaten our bottom line, it can impact our community too. Brick-and-mortar stores like ours play an important role in our society and economy. When was the last time your online retailer hosted group bike rides in your community or provided mechanical support during a local race? Traditional retailers add nearly four jobs for every million dollars of increased sales. Online retailers add just one. When local businesses thrive, the community thrives. Big Poppi has made a point of giving back to our community through our “Give Back” program that allows customers to donate 5% of their purchases in the past 12 months to worthy causes.

By shopping locally you are investing back in your community. You’re helping us provide good-paying jobs and are supporting a business that is working to make Manhattan a better and more vibrant place to live. Additionally, your sales tax dollars are a critical source of revenue for the city of Manhattan. Those dollars fund everything from roads, to schools, to police and fire departments. Good infrastructure, good schools and safe neighborhoods raise property values. It’s a win-win all around.

Right now we need Congress to move forward with the legislation that would require online sellers to remit sales taxes back to the appropriate jurisdictions. According to a recent national survey, 70 percent of Americans support federal legislation that would require online-only sellers to collect sales tax at the time of purchase. But Congress is dragging their feet as they have for nearly 20 years. The time has come for to invest in our future and ensure continued economic growth by enacting efairness legislation in 2015.

It’s High Time Congress Passed Efairness

Cara Leigh and Sten Wilson Point of View Farm 8.21.2014Many people maintain that if Congress enacts The Marketplace and Internet Tax Fairness Act (MITFA) then buyers will end up paying more taxes to states. They also mistakenly represent that out-of-state retailers would become responsible for paying sales and use tax, and the process of calculations and remittances would overly burden small businesses. All of these statements are misleading, and attempt to guide intended beneficiaries away from the real benefits of MITFA.

Let’s address the second misrepresentation first. Retailers don’t pay sales taxes. Consumers do. Currently brick-and-mortar and a handful of online retailers do need to collect the sales taxes that are due from buyers and remit those monies to the appropriate jurisdictions. In the case of locally made purchases, retailers collect sales and use taxes from consumers at the point-of-sale. These consumers typically live, work, and shop within the same tax jurisdictions. Taxes on out-of-state purchases are not currently being collected and remitted automatically despite States’ rights to charge those taxes.

So, yes, if Congress enacts MITFA, consumers would pay evaded taxes on their out-of-state purchases. However, such a statement only represents a partial truth because most consumers currently evade remitting their tax obligations on out-of-state Internet purchases to a tune of conservatively $23 billion a year, based on a 2009 University of Tennessee Study, and many are numb to the fact they are actually paying higher alternative state taxes and fees enacted over the past decade to counteract their evasive choices. Instead, consumers in an ideal world would simply honor their tax obligations on out-of state purchases allowing current legislation to simply enact a policy shift streamlining sales tax collection and remittance for everyone.

Clearly there are great sums of un-collected sales tax dollars at stake, whether remaining unpaid or ultimately collected by states. But for a moment let’s agree to remove the financial component from the discussion, and proceed assuming that consumers are actually honorably paying all taxes due, ideally eliminating sales and use tax deficits. In this ideal world, consumers dutifully keep track of every one of their out-of-state and online purchases, calculating taxes due, and mailing the required payments when filing their state tax returns, as required by law in most states going as far back as 1930. Really, this is an onerous burden and is rarely undertaken by consumers, even if they are aware of their legal obligation to do so, which many are not.

Likewise, tracking such calculations and remittances are perceived burdensome for out-of-state retailers, as upheld by the Supreme Court in its 1992 decision in Quill Corporation v. North Dakota. Simply put, the Supreme Court determined the systems and procedures available for tracking and processing out-of-state taxes, in 1992, were unequal to the task, and thus collecting taxes from remote buyers posed an undue burden for out-of-state merchants. But, it is important to note that the 1992 ruling focuses on the burden of payment and collection, rather than on the obligation for payment and collection.

However, much has changed in the 22 years since the Quill decision. As in any marketplace, shifting economic conditions, new innovative technologies, and exponentially expanding interstate sales volumes continue increasing the demand for more efficient technologies including sales tax processing. And lo and behold, there are now innovative companies providing numerous technologies to enable businesses of any size to easily calculate, collect, and remit sales taxes due for any jurisdiction in any state in the nation. And what is more, many of those new sales tax-processing technologies—some even free to use–easily integrate with existing shopping carts and checkout platforms eliminating costly enterprise software solutions, and fully automate sales tax processing.

So in our ideal world, those current tax-paying consumers and tax collecting businesses can now rejoice since innovation easily eliminates onerous legacy sales and use tax requirements from their lives. Furthermore, innovative technologies hold the prospect for actually driving down prices since they fully automate sales tax processing, reducing costly legacy administrative burdens for consumers, businesses and states, freeing labor for additional income generating activities, creating innovation and restoring fair competition.

But, previously burdened consumers and businesses, now steadfast supporters, are not the only ones who will benefit. States also get to celebrate since they are now empowered to receive those previously evaded tax dollars that they can use to fund programs and services in continual demand by their constituents’ ballot initiatives. And by collecting tax payments on out-of-state sales, states can reconsider and eliminate tax and fee increases imposed on their residents over the last decade that were created to compensate for the shortfalls of evaded out-of-state sales taxes. In addition, equal distribution of tax burdens will lower individual taxpayers’ burdens.

In other words, in the two decades since the Supreme Court’s Quill decision, the free market can now supply innovative products to meet the demand for the efficient collection and remittance of interstate taxes. The old inefficiencies of the legacy systems are now replaced, bringing us closer to that ideal world.

So now, let’s leave the notion of an ideal world and return to today and the evaded $23 billion. Those missing tax dollars have gone unpaid because the burden behind collecting and remitting them was too high. That is no longer the case as the free market system of supply and demand has met that challenge. Thus, the only obstacle standing between that ideal world and us is the outdated Quill decision. And contrary to any argument, the Supreme Court noted that Congress is free, by an affirmative exercise of its power under the Commerce Clause, to change that rule. It is high time that Congress moves forward immediately by enacting the Marketplace and Internet Tax Fairness Act before the end of 2014.

Don’t listen to the naysayers – eFairness momentum picks up in Congress!

US Capitol

While the opposition would have you believe that Congress will let the clock run out on efairness legislation, the latest activity in both the U.S. House of Representatives and Senate demonstrates otherwise.  Champions in both chambers are determined to level the playing field for small businesses in our communities by closing the online sales tax loophole, and they mean to get it done this year.

After the May 2013 Senate passage of the Marketplace Fairness Act (MFA), which secured a solidly bipartisan 69-27 vote, local businesses became more hopeful than ever that Congress would finally pass legislation that would give them a fair chance to compete against their online counterparts.  While House Judiciary Chairman Bob Goodlatte (R-VA) has expressed concerns over the Senate version, he and members of his committee on both sides of the aisle agree that our local businesses are suffering and that Congress must solve the problem.  Fortunately, small community retailers found another efairness champion in Congressman Jason Chaffetz (R-UT), who has been working diligently to draft amendment language that would address the Chairman’s concerns. He joins Congressman Steve Womack (R-AR), the longtime sponsor of MFA in the House, and Congresswomen Jackie Speier (D-CA) and Suzan DelBene (D-WA), who have been actively working with their Republican colleagues on perfecting legislative language.

Activity picks up in the House

On July 15, the House of Representatives passed H.R. 3086, the Permanent Internet Tax Freedom Act (PITFA), which would seek to make a moratorium on Internet access taxes permanent. Right now it’s set to expire in November.  During the June 18 markup of that bill in the House Judiciary Committee, Congressman Chaffetz and several fellow members of the committee spoke up in support of taking action on MFA.  Then, during the July 15 floor debate on the measure, Representatives again called for the House to move forward with efairness legislation. Why is this significant? Because they are voicing the attitude of many legislators who would like to see PITFA and MFA combined into a single bill, agreeing that passage of both measures this year is critical.

Great minds think alike

Meanwhile, also on July 15, a group of bipartisan Senators led by Mike Enzi (R-WY), Dick Durbin (D-IL), Lamar Alexander (R-TN), Heidi Heitkamp (D-ND), Susan Collins (R-ME) and Mark Pryor (D-AR) introduced S. 2609, the Marketplace and Internet Tax Fairness Act (MITFA).  The new legislation combines a re-tooled Marketplace Fairness Act (MFA) and a 10-year extension of the moratorium on Internet access taxes under the Internet Tax Freedom Act. Consideration of MITFA is being fast-tracked under Senate procedural rules and consideration on the Senate floor could begin as early as next week. This legislation will also need approval in the House of Representatives.

While passage of efairness legislation has been a top priority for local retailers and shopping centers for more than a decade, the activity in both chambers is sending a clear message that leveling the playing field for all retailers is a top priority for Congress this year too.

How you can help  

For ideas about how you can help, visit www.efairness.org.  You can also follow the discussion on Twitter through our handle @efairness.

Marketplace Fairness is a Win for Everyone

Kim & Friend resizedA competitive retail marketplace is good for everybody. Customers get better prices, better selection and better service. Retailers are rewarded for competing and winning their business. For that system to work though, you need to have a level playing field for everyone. That’s what the Marketplace Fairness Act is about. Whether you’re a local small business or a big out-of-state warehouse retailer, the same rules should apply.

Letting the biggest online retailers off the hook for collecting sales taxes makes the marketplace less competitive by driving out small local retailers. And letting big out-of-state retailers avoid collecting state and local taxes also hurts communities like my hometown of Sparks, Nevada.

Local stores have proven that we can compete if given the chance. Not only that, we also create local jobs and support local charities and community events. When someone buys something from a neighborhood brick-and-mortar store, that money goes toward paying local salaries and local utilities. It pays local vendors for their help keeping local stores in business collecting local sales taxes. That money goes on to pay local plumbers, accountants, consultants and other retailers in the area. It’s the money we use to pay for our employees’ healthcare and educate our families, supporting the people in our community who deliver these essential services.

When a customer comes to Bag of Bones, a dog store we founded in Sparks, Nevada in 2004, they find a wide variety of dog food options. Pet owners today enjoy an unprecedented selection of specially formulated dog foods for dogs almost any size, shape and age. That selection can be intimidating to new pet owners. That’s why our store gives customers the benefit of a knowledgeable staff to help them find what they need. And when they shop in-store, they get the added value of supporting their local economy and local public services with each purchase.

Now let’s imagine that same customer decides to visit one of our out-of-state online competitors instead. The customer might find many of the same bagged and canned dog foods, but not the locally-made treats we sell at the register. Having gotten customer service previously from our staff, they already know what they want to buy, but they miss out on the conversation that teaches them something new about pet ownership. Not knowing what they’re missing, the customer adds the dog food to their shopping cart. Many online stores already offer free shipping already, and most are not required to charge sales taxes even though customers still have to pay them.

That customer checks out thinking they got a discount in the amount of the sales tax. But that difference in the sales tax is money that no longer goes to pay for state and local services. And since the online retailer is based out-of-state, that money flies off to New York or California, never to return to Sparks. The customer gets no local reinvestment value from their purchase and now has the added responsibility of calculating and sending their sales tax payment to the state on tax day. All because a large out-of-state retailer didn’t want to install some simple tax collection software or have to compete on a level playing field with local retailers like me.

I would love to see this loophole finally close in 2014. Free markets mean better prices, better service and better selection for consumers. They keep the government from micro-managing the retail marketplace by picking who wins and who loses. And even the biggest internet retailers headquartered all the way across the country will still benefit from our strong local economic growth. It’s a win-win for everybody.

Kim Hunter is the owner of Bag of Bones in Sparks, NV.