Online Sales Tax Loophole Slowly Killing Small Businesses

Like many small businesses, mine is a family affair. My father George and my mother Sylvia entered the bookselling business more than 30 years ago in an old gas station. For three decades our family has nurtured and grown Givens Books and later Little Dickens into the successful businesses they are today.

But local businesses like mine and the communities they serve are facing a serious threat from online retailers who are exempt from collecting sales tax.

It’s time for Congress to address the online sales tax collection issue.

When online businesses without a physical presence in the state circumvent sales tax collection, they pull customers away from Main Street retailers like my business, where our friends and neighbors work, local products are sold and taxes collected. These sales taxes, in turn, go to local schools and a myriad of infrastructure projects. In addition to the attrition of locally owned and operated businesses, which constitute the backbone of our communities, badly needed revenues are also lost because of this unfair loophole for online-only retailers. This year, Virginia will lose over $200 million in uncollected sales tax revenue. The most hurtful irony in this whole saga is that the lost revenue would have come from behemoth retailers making billions in profits…in short, the ones most able to afford the collection and remittance of these taxes.

Online-only retailers can sell items at a lower price — guaranteed to be 4-7% cheaper because they are exempt from having to collect sales tax.

This competitive advantage is fundamentally contrary to the principles of the free market system that have allowed America to thrive for so long. It also amounts to a government subsidy for certain online-only retailers…and it’s crushing local economies.

It only makes sense for online retailers to collect sales tax on purchases…as brick-and-mortar businesses in Virginia do every day.

Givens Books sells goods online, too.  I’m not opposed to online retailing.  On the contrary, it’s a great way to diversify your business model. However, the problem is that brick-and-mortar retailers are at a distinct disadvantage compared to online sellers. We pay property taxes, trash collection fees, electricity bill surcharges and other fees.  Online sellers do not.  And as state and local governments look for ways to make up for the lost sales tax revenue all of these other costs are likely to go up, further hurting local businesses.

Congress must pass the Marketplace Fairness Act and the Marketplace Equity Act, and give states the power to end the de-facto government subsidy for online retailers.

Danny Givens is the owner of Givens Books and Little Dickens in Lynchburg, VA.

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