The market is the only thing that should be determining winners and losers when it comes to American businesses. Yet, since the early 1990s this has not been the reality for brick-and-mortar businesses across the country. The 1992 Supreme Court ruling in Quill Corp vs. North Dakota have prevented states and communities from requiring sales tax collection from vendors not physically within their borders. The effect has been a chronic and persistent imbalance in prices between online vendors and their brick-and-mortar counterparts. The exclusion of sales tax at the state and local level allows online vendors to offer prices 5-8% lower across the board. This lower pricing not only puts brick-and-mortar retailers at a disadvantage, it also deceives the consumer.
The subtle reality is that the Supreme Court’s ruling does not eliminate sales tax for online purchases; it merely allows online vendors to push that burden onto consumers. The consumers still owe the tax, and so they aren’t actually saving money when they purchase from an online retailer rather than at a store like mine. To be clear, under current law, consumers are required to write two checks for every one online transaction where the sales tax is not collected: one check to the vendor and one check to the state/local revenue service. This is not only inconvenient, it is ridiculous.
Some online businesses have and will continue to complain that collecting and remitting sales tax to all 50 states with various rates and laws is too cumbersome and time consuming. But the truth is that affordable and easy-to-use software exists that will do this for them. What’s actually cumbersome is for consumers to track, calculate and report each every online purchase and submit the tax to state and local revenue services. Brick-and-mortar stores are required to this for their consumers. It shouldn’t be any different for online vendors.
It’s high time for our elected representatives in Washington, D.C. to level the playing field by passing the Marketplace Fairness Act and the Marketplace Equity Act. Doing so will not only level the playing field for brick-and-mortar retailers in Michigan and across the country, but will also dispel the myth of “tax-free online shopping” and make life easier for consumers. That’s something we should all be able to get behind.
Dan Marshall is the 2nd generation operator of a family-owned chain of music stores called Marshall Music, with seven brick-and-mortar stores located throughout Michigan.