E-fairness: Good for Oak Ridge, good for Tennessee, good for the nation

Let’s start with a given: online retail sales have always been subject to state and local taxes. The percentage of people who pay those taxes voluntarily, however, is in the single digits. The low single digits.

Taxes are never popular. But Marketplace Fairness isn’t about higher or lower taxes, it’s about fair collection of the taxes that people owe. Passing the Marketplace Fairness Act would restore parity to the retail market, giving every retailer the same opportunities to compete. It would remove the government tax collection bias that weighs unfairly on the brick-and-mortar.

I believe in free markets. The principles of fair and honest competition are what drive retailers big and small to offer the best products and service. Thriving retail markets also bring tourists and generate the economic activity that keeps many small towns alive. Remember that the taxes these towns collect from retail sales aren’t going to huge federal spending programs. Local governments collect taxes so they can build schools and pay local teachers to educate the kids in their communities. These taxes go to essential emergency response services, and business and community development programs that make it easier for kids to become entrepreneurs, to become local job creators, and to fuel the local economic engines of communities across the U.S. Local taxes drive growth at the local level, and fuel economic development from the ground up.

When Oak Ridge needed a new high school, the city put a referendum on the ballot to pay for it. Voters approved that referendum by a wide margin. Nobody likes paying taxes but when the choice was between saving a few dollars on a blu-ray player or having enough classrooms to keep our kids on the path to success, the voters stepped up. And as much as I love Oak Ridge, I know popular support for this kind of essential local service goes beyond our community.

If the harshest critics of mom-and-pop retail are right, and in-person retail is dead, little towns and villages around America are dead, too. Our state collects no income tax, meaning that we rely entirely on sales and property tax revenue. Vanishing retail sales taxes likely mean higher property taxes to offset the lost revenue.

But I don’t buy into this doomsday theory. Go to your local mall or Main Street and you’ll see families out shopping together. Retail isn’t just a transaction, it’s an experience. It gives people a way to spend time together. And it helps us get out of our houses to go see movies and eat at local restaurants that connect us to our hometowns. And there’s nothing like going to a mom-and-pop store and actually knowing mom and pop. These are our neighbors, and the care they bring to their work makes in-person retail experience something you cannot replace with a webpage.

So really the question is: on what terms should all retailers compete? Should everyone collect taxes according to the same standards, or should online retailers get a special exemption from collecting the taxes we already owe when we shop at their websites. For retailers and local communities, this isn’t just an academic debate, it’s a question of fair competition and balanced budgets. The time has come for a level playing field. Let’s not wait for more shops to close their doors and send their employees home. Let’s make Marketplace Fairness the law and let state and local governments collect their own taxes on their own terms.

Parker Hardy is the President and CEO of the Oak Ridge Chamber of Commerce. 

States, businesses and consumers would all benefit from the Marketplace Fairness Act

The Tenth Amendment provides that any authority not expressly delegated to the federal government by the Constitution remains with the states. Much of the strength of our federal system lies in the resultant diversity of our states.

That dichotomy has been eroded over time as the federal government—the Executive Branch, the Congress, and the Supreme Court—has limited states authority even while relying on state and local governments to implement national policies.

At the same time, technological advances have made it easier to traverse the country physically and electronically, creating new challenges to state sovereignty.

However, in our e-commerce world where physical boundaries are transcended, Congress has the opportunity to work with states to reverse a Supreme Court decision and repair one of the most basic tenets of state sovereignty: the ability of a state to develop and manage its fiscal system.

Specifically, in a world in which buying a pair of pants can be done at either the corner store or on the Internet, it is time for Congress to allow states to collect sales taxes on all sales into a state. The passage of the Marketplace Fairness Act will allow states to level the playing field between Main Street retailers and online sellers, improve revenue collections and increase competition for consumers.

Annually, states fail to collect more than $20 billion from transactions conducted over the Internet or through catalogues. Although the tax is owed, states cannot compel sellers, who do not have a physical presence in the state, to collect the sales tax without federal legislation. The explosive growth of electronic commerce—more than 10 percent annually even during the recession—means states’ existing sales tax bases are eroding, increasing states’ reliance on other revenue streams.

In our federalist government, states must be allowed to control their tax systems. However, it is noteworthy that in Quill v. North Dakota, the Supreme Court said only Congress can give the states the authority they need to require collection from out-of-state vendors selling into their states.

Much of this 1992 decision was based on catalog sales and the apparent complexity of collecting sales taxes in 50 states. In recent weeks, the opposition has focused on the supposed complexity of collecting taxes on Internet sales, saying it creates a burden for small businesses. Six companies currently manufacture software that automates collecting remote sales tax. Software like this will be supplied by states to businesses at no cost.

Opponents of Marketplace Fairness also will say that this is a tax increase. Not true—it is a means of collecting taxes already owed by consumers. Nor is it a tax on the Internet or on business.

From the states’ point of view, if a company is crossing state boundaries, whether physically or electronically – doing business, selling goods and soliciting customers in their state – that company should have to play by the local rules. If a state has a sales tax, then everybody selling goods in that state should have to collect and remit it. This philosophy is not only fair, it also promotes competition, which is good for consumers; helps with collections, which keep other taxes down and help pay for essential services; and levels the playing field for business.

For business, this legislation means that the corner store is on the same footing with the online retailer. In other words, the online merchant has the same requirement to collect sales taxes as the local sporting goods store that employs our neighbors and sponsors the little league team. In a 21st century economy, it does not make sense to play by 1950s rules. A sale no longer requires a storefront or a handshake. The Internet has spurred our economy and increased choice, but it doesn’t need a subsidy—it needs to follow the rules like everyone else.

The Marketplace Fairness Act, which passed the Senate with overwhelming bipartisan numbers, seeks to enhance federalism, improve fairness in state sales taxes, keep jobs in our communities, and reverse the erosion of a traditional state tax base.  It is common-sense legislation that Congress can and should pass this year.

Dan Crippen is the executive director of the National Governors Association (NGA).

Coalition Statement on Senate Cloture Vote

WASHINGTON DC – The Marketplace Fairness Coalition issued the following statement regarding the cloture vote in the Senate that allows debate to move forward on The Marketplace Fair Act:

“This vote represents an important first hurdle cleared in the effort to level the playing field for all businesses while restoring a state’s right to enforce it’s own laws.

“There is still an important debate ahead but it’s clear from this strong bipartisan vote that many Senators in both parties recognize this is a long overdue step towards helping states, local governments and America’s small businesses.”

The Marketplace Fairness Coalition is comprised of businesses of every size, sector, and channel of product distribution, located in every state throughout the country.

The Marketplace Fairness Act is Back

This month, brick-and-mortar retailers have reason to celebrate. Thanks to a bi-partisan group of U.S. Senators and Representatives, the Marketplace Fairness Act is back. The legislation, which was introduced earlier this month by Senators Mike Enzi (R-WY), Dick Durbin (D-IL), Lamar Alexander (R-TN) and Heidi Heitkamp (D-ND), and Representatives Steve Womack (R-AR), Jackie Speier (D-CA), Peter Welch (D-VT) and John Conyers (D-MI) resolves the differences between bills introduced in the Senate and House of Representatives last Congress.

Over the last several years, a broad coalition of Main Street businesses and organizations from across the country have come together to urge Congress to support marketplace fairness. With the introduction and strong bi-partisan support for the Marketplace Fairness Act, these groups have formally joined together to form the Marketplace Fairness Coalition. The members of the coalition represent nearly 3 million businesses, associations and organizations across the country. I’m proud to say that the International Council of Shopping Centers is one of the driving forces behind the coalition.

In addition to the private sector, I see a great deal of momentum for e-fairness growing at all levels of government, from local communities to state legislatures to Capitol Hill. Each month more states put pressure on Internet sellers to play by the same rules as their brick-and-mortar counterparts and collect sales tax at the point-of-purchase.  They need the support of Congress to get it done.  And we’re working to make sure they get it.

I have never been more optimistic about the chances of enacting federal legislation. And it has never been more important. Local businesses cannot afford another year of competing on an un-level playing field. Every day Main Street retailers are forced to shutter their doors because they simply cannot compete against an entire industry that enjoys a de-facto 5-10% government subsidy.

Please join us as we work to level the playing field for all retailers. Visit our website, sign up for updates and follow us on Twitter. Talk to your elected officials in Washington D.C. Tell them that we all need a sales tax system that supports our 21st Century marketplace. Tell them that they should support the Marketplace Fairness Act. We’re closer than ever to passing federal legislation this Congress. We need your support to get it done.

Michael P. Kercheval is the President and Chief Executive Officer of the International Council of Shopping Centers (ICSC). Founded in 1957, ICSC is the premier global trade association of the shopping center industry.

Congress should take better care of the instruments of business

Musical instruments are all about passion. Musical instruments are sold by a group of very passionate people at the brick-and-mortar level. Other than the 5% of our customer base that earn their living as professional musicians, the great majority are semi-professionals, garage band warriors, or just folks who play for their personal pleasure, spending their discretionary income on their passion. As a long-term, 30 plus years in business brick-and-mortar retailer, Advance Music prides itself on, and truly enjoys, the face-to-face relationships we establish with our customers, and the honest information we provide them in making buying decisions that make them feel great and provide a lifetime of enjoyment!

The number one hurdle that we encounter here when it comes to the price negotiation phase is the sales tax issue. We match Internet pricing all day long, but with the economy riding its constant up and down wave, every dollar counts to our customers, and while we absolutely understand that, we are also aware that each customer is legally obligated to pay this sales tax, whether buying in a local brick-and-mortar shop or online. We don’t feel it’s our job to explain this to any customer, and it would probably just alienate them in the process. My feeling is that most people don’t pay taxes on their online, out-of-state purchases.

I’m not stretching the truth when I say that at least twice a day a customer will ask us to “eat” the sales tax on a purchase. It immediately puts the sales person in an awkward position. You can attempt to explain the benefits of paying state sales tax, how the pot holes are fixed, fires put out, criminals arrested, etc., but most customers just care about the bottom line price. This is where the out-of-state Internet retailer has such a huge and unfair advantage over us…THEY ARE NOT REQUIRED TO CHARGE THE SALES TAX! So we, as local brick-and-mortar retailers, are forced to ask ourselves “Am I willing to take that 7% hit to my profit margin?” or “Am I willing to let this customer walk and lose this sale?” My favorite is the customers who use us as an Internet “showroom” and in some cases we’ll even “loan” them a product to try overnight in their home….they bring it back, tell us they love it, and ask “can you eat the tax?” I can’t tell you how much this hurts, especially when I just can’t do the deal at the slim margin and they simply buy online!

Hey Congress, level the playing field out there! Help all of us local retailers make this a non issue in our local brick-and-mortar shops. Let me pay my folks better, offer better benefits, and maybe even hire a couple of more employees based on my increase in business. Let my state receive the tax dollars it deserves to help fund local programs and municipalities. It really is that simple!

Mike Trombley is the owner of Advance Music Center in Burlington, VT.

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