During the outset of this holiday shopping season two record-breaking sales days have benefited online retailers. Online sales during Black Friday exceeded $1 billion for the first time in history, and this past Cyber Monday was the biggest online shopping day of all time – with sales in the neighborhood of $2 billion.
In the modern-day retail marketplace, online retailers are ubiquitous, enjoy ease of access to consumers, and as this year’s Black Friday online sales and Cyber Monday sales demonstrate, these sellers enjoy great success. Unfortunately, under existing law, online retailers enjoy something else – an inherent competitive advantage over brick-and-mortar retailers.
When a brick-and-mortar jewelry store sells an engagement ring, that store is required to collect sales tax. However, when an online-only retailer sells the same engagement ring, that retailer is not required to collect sales tax. To address this grave disparity in the treatment of brick-and-mortar versus online retailers under our current system, bipartisan coalitions in Congress have introduced the Marketplace Equity Act in the House and Marketplace Fairness Act in the Senate.
Both bills would give states the authority to require online retailers to collect sales tax on remote sales from the consumer and remit that tax to the consumer’s state. This is not a new tax. Rather, it is an existing but often uncollected tax. Most consumers do not understand they are required under current law to remit sales tax for online purchases when the seller does not collect and remit sales tax.
If online retailers sell the same jewelry pieces to the same customers in the same neighborhoods as brick-and-mortar jewelers, then they should be required to adhere to the same tax laws – plain and simple.
Opponents of existing e-fairness legislation claim to be champions of small business and free market principles. If this is indeed the case, then why are these critics such ardent proponents of an inequitable system that creates an economic incentive for consumers to buy a desired product online instead of from a brick-and-mortar store?
I applaud the efforts of the cosponsors of the Marketplace Equity and Marketplace Fairness Acts to restore competitive balance to the retail marketplace. With the holiday shopping season in full swing, and as brick-and-mortar small businesses struggle to remain viable in an uncertain economy, I can think of no more appropriate time for Congress to once and for all put an end to an unjust and outmoded loophole in our sales tax laws.
Matthew A. Runci is the President and CEO of Jewelers of America (JA) in New York, N.Y. JA is the national trade association for businesses serving the fine jewelry retail marketplace. Its membership includes approximately 3,300 retailers and suppliers with over 10,000 retail storefronts in all 50 states and Washington, D.C. Over 90% of JA’s members are single-store operators.