An article in The Statesman (Texas) describes a meeting of the Texas House Ways and Means Committee, which is considering how best to deal with the issue of online sales tax—a particularly sensitive issue in the state because of Amazon’s threat to close its warehouse there rather than collect sales tax for Texas, as it is required to if it has a physical presence in the state.
What we found most interesting was the testimony of small business owners before the committee:
Gregg Burger , general manager at Precision Camera in Austin, said his store last year had $17 million in sales and collected $1.5 million in sales tax. He estimated that Precision Camera loses about $5 million per year in sales to online retailers.
This is the first time we’ve seen a number that indicates just how much money local retailers are losing to online retailers, and it’s not a small number—it works out to about 30% of the store’s annual sales.
The testimony got emotional at times, showing just how important the issue is to local small business owners:
“We are losing tons and tons of business out of the state,” Burger said. “We are losing millions of dollars by letting out-of-state competitors take our jobs and our money. We want to collect the tax. Please, please, let’s get this through.”
The article also describes a pending bill that would “amend the state tax code to say that a company can’t be classified as a retailer required to collect sales tax if it, or a subsidiary, operates or uses “only a fulfillment center … or a computer server” in Texas. Clearly, it’s intended to allow Amazon to keep its fulfillment center in Texas open without having to collect sales tax for Texas.
But the bill contradicts the Supreme Court ruling that says a retailer with a physical presence in a state must collect sales tax for that state. Should the it pass, we predict that we’ll see court challenges and appeals that will prevent it from being enacted.
We also found a quote by the author of the bill, Rep. Linda Harper-Brown, interesting. The article quotes her as saying that “she is working ‘to make sure there’s balance in the bill to avoid hurting “mom-and-pop” businesses but not create more problems for Amazon.’ ”
By saying she’s working to avoid hurting mom-and-pop businesses with her bill, she’s implicitly acknowledging that they are hurt when online retailers avoid collecting sales tax—if they weren’t, she wouldn’t have to work to avoid hurting them.
We’re glad to see that word is getting out: when online retailers don’t have to collect sales tax, it hurts local retailers who do. Let’s level the playing field and require all retailers, online and off, to collect sales tax.