Press round-up on Marketplace Equity Act

October 15, 2011
Press round-up

Press round-up: News on the Marketplace Equity Act

Here’s a round-up of the press coverage on the Marketplace Equity Act, introduced yesterday:

– from Politico, “Online sales tax bill splits community”

– from the National Journal, “House online sales tax bill draws bipartisan support”

– from Internet Retailer, “A new take on web sales tax collection”

– from the Tax Foundation’s Tax Policy blog, “New state online sales tax bill introduced in Congress”

– from Bookselling This Week, “New federal sales tax fairness legislation introduced”


Marketplace Equity Act (HR 3179) introduced in House of Representatives

October 14, 2011

HR 3179 introduced in House of Representatives

Today Rep. Steve Womack (R-AR) and Rep. Jackie Speier (D-CA) introduced before Congress the Marketplace Equity Act (HR 3179), a bill that, like the Main Street Fairness Act, authorizes state to require all online retailers, regardless of location, to collect state sales tax.

The introduction of the Marketplace Equity Act is a sign that more and more legislators are becoming aware of the problems inherent in the fact that while bricks-and-mortar retailers have to collect sales tax, online retailers do not. We’re happy to see that Washington DC legislators are listening to state and local legislators—not to mention their constituents—and are working hard to offer possible solutions.

Although the Marketplace Equity Act differs in some details from the Main Street Fairness Act, the two bills have the same goal: to ensure that states can enforce existing sales tax laws in cyberspace by requiring online retailers to collect sales tax. The very fact that two bills with this goal exist emphatically demonstrates how much they are needed.

Communities need sales tax revenue to pay for schools, police, and libraries, and local businesses are at a disadvantage when they try to compete with online retailers that don’t have to collect sales tax. By allowing states to require online retailers to collect sales tax, the Marketplace Equity Act and the Main Street Fairness Act stand to return to states over $23 billion in uncollected sales tax. They will also create a level playing field for local retailers, which create three times as many jobs as online retailers.

We welcome Reps. Womack and Speier and their cosponsors to the fight to ensure that all retailers play by the same rules, and we look forward to working with them.


Growing momentum for local online sales tax movement

October 13, 2011

The local and state efforts toward online sales tax collection is gaining momentum, as is clear from the recent deluge of local articles on the issue. Here’s a selection:

– from the Holland Sentinel (MI), “The case for fairness: A sale is a sale is a sale”:

According to a report released last month by Lansing-based Public Sector Consultants, the sales tax loophole has a significant negative impact on job makers and the state’s economy. The study found that closing the loophole would directly lead to the creation of as many as 1,600 new jobs, would increase investment in Michigan’s economy in the form of sales at brick-and-mortar retail outlets by as much as $126 million per year and would save the state as much as $141.5 million in otherwise lost sales tax revenue from electronic remote sales in 2012 alone.

– from NorthJersey.com, “Internet retailers might lose tax edge”:

In my mind, it comes down to a question of fairness, as stated by John Holub, president of the New Jersey Retail Merchants Association:

“Online-only retailers are costing the State of New Jersey hundreds of millions of dollars in tax revenue and are underselling New Jersey’s small-business owners. It’s time for New Jersey to modernize its tax structure and close this unfair tax loophole.”

– from the Bismarck Tribune, “It’s simply an issue of fairness”:

A customer goes into a local business to check out a product. This person finds a computer, makes an online purchase of that same item and avoids paying the sales tax.

Is that fair to a North Dakota brick-and-mortar business that employs our state’s citizens, invests in the community and helps drive the local economy? I don’t think so.

That’s why we need The Main Street Fairness Act. This legislation will close the loophole that gives online retailers a competitive advantage over the local businesses.

– from Tampa Bay Online, “Solution sought for sales tax ‘loophole'”:

Some shoppers look over a product at local stores and then buy it online in hopes of avoiding the sales tax, Alpine said. Stores end up being treated like a showroom.

“It needs to be an equal playing field,” he said.

“Without a doubt this is an enforcement issue that ultimately can only be fully resolved if the federal government weighs in,” state Rep. John Legg, R-Port Richey, said in an email.


Tennessee strikes deal with Amazon

October 9, 2011

Tennessee and Amazon have agreed to a deal similar to the one between California and Amazon. This deal requires Amazon to begin collecting sales tax for the state in 2014—unless federal legislation on online sales tax has passed by then—and the company will create 3500 full-time and several thousand seasonal jobs in the state. This Missouri News Horizon article has the details.

The agreement comes after years of back-and-forth between Amazon and the Tennessee government. Former governor Phil Bredesen, who preceded current governor Bill Haslam, made a deal for Amazon to bring several distribution centers to Tennessee, creating 1500 jobs, in exchange for an exemption from collecting state sales tax. There had been strong objection to that deal from local Tennessee retailers and others, and there was some question as to whether Haslam, once elected, would uphold the deal made by Bredesen:

The new agreement is a dramatic shift from the original deal struck by the state with Amazon, in which former Gov. Phil Bredesen and his team evidently agreed to allow Amazon to forego collecting sales taxes in exchange for creating hundreds of jobs with distribution centers in Hamilton and Bradley counties.

Haslam had agreed to honor that original deal, and state officials Thursday insisted the new agreement does not mean the state has gone back on its word. . . .

“I’ve been asked several times over the course of the last couple of months if working on an agreement like this is doing what we said we would do as a state. The answer is yes,” Haslam said. “The scope of the project has changed, with the addition of newly planned facilities here, and that conversation in the Legislature and in states across the country has had an impact.”

The agreement won’t apply if federal legislation is enacted before 2014:

Haslam said the agreement applies unless a national solution, which would bring all states under the same framework on state sales tax collections, comes first. Many people believe Congress should act to make application of sales tax law the same for online and traditional retailers.

Tennessee Governor Bill Haslam has spoken publicly in support of the Main Street Fairness Act in the past, and he mentioned it again during the announcement:

“Of the online retail sales where tax is not being collected Amazon is only about 10 percent of it,” Haslam said, adding that that is why he has called for a national solution. “It’s not just about Amazon.”

Paul Misener, Amazon’s vice president for global public policy, was present at the announcement and also made a statement that included strong support for federal legislation:

The Amazon executive said his company supports efforts to streamline sales tax collections nationally.

“The sales tax issue must be resolved in Congress,” Misener said. “It’s the only way the state of Tennessee will be able to retain all the sales tax revenue that can be collected for the state.

“We are committed to going to Washington with the state’s leaders, both here in Nashville and also in Washington, to obtain that sales tax legislation as soon as possible.”

With all this vocal support for the Main Street Fairness Act from both Amazon and state legislators, there seems to be a general consensus that federal legislation is the best solution for everyone. But in its absence, states will do whatever they can to try to make sure sales tax is collected online as well as in local stores.

We hope Congress is noticing the rapidly increasing support for the Main Street Fairness Act among state legislators. These are the people who work where the rubber meets the road and know exactly what their states and communities need to function properly.

Unfortunately, in this case they are not the ones who have the power to make sure states and communities get what they need. That’s Congress. But members of Congress need to listen to what local and state legislators are telling them and then put their support behind Main Street Fairness Act.


Reuters: State and local leaders on both sides of the aisle ask Congress to close online sales tax loophole

October 4, 2011
Reuters: Strapped states crave bigger online tax bite

Reuters: Strapped states crave bigger online tax bite

We were fascinated by a new Reuters article that focuses on states’ loss of revenue due to uncollected online sales tax.

Among the facts that caught our eye was this tidbit:

On the state level . . . financial pressures seem to have erased partisan division on the issue. Texas’ majority Republican legislature passed its legislation, and California’s measure had support from both parties.

Hoping to bring that cooperation and a sense of urgency on the issue to Washington, local businesspeople, mayors and other officials from states have been lobbying on Capitol Hill. (emphasis added)

We’ve always believed that online sales tax collection is a bipartisan issue—it’s not about creating a new tax or raising taxes; it’s simply about closing a loophole that’s draining states’ abilities to fund critical local services. We’re glad to see that state politicians are willing to forget about partisanship in order to serve the greater good, and we think that even on the federal level, there’s more agreement than not on the issue. Over time, we believe that more and more political leaders on both sides of the aisle will speak out for the Main Street Fairness Act—particularly since the article quotes a spokesman for the Alliance for Main Street Fairness as saying that “between 150 and 200 members of Congress come from states which have recently taken action and would see hometown support for a federal solution.”

The article also includes a quote from Oklahoma City Mayor Mick Cornett, who’s “lobbied extensively for federal action” (and who is, we note, a Republican), that offers some specific figures on what the lost sales tax revenue would have paid for:

Cornett says the $10 to $15 million a year his city loses on uncollected taxes equates to between 100 and 150 firefighters or police. He says he’s making progress arguing that these are taxes already owed, not new taxes.

“Now you find conservatives in Washington who understand this is closing a loophole, it’s not a new tax,” says Cornett.

Most cities are just hanging on, trying to keep the firefighters and police on the street. This is one way Congress can help local governments without it costing them anything.” (emphasis added)

Granted, that figure applies only to Oklahoma City, but it does give us some idea of just what we lose when online retailers don’t collect sales tax. Consider, too, that the 100 to 150 firefighters or police officers that sales tax would have paid for isn’t only a loss to the community, as important as that is. It’s also a loss of new jobs at a time when they are desperately needed. If Oklahoma City had had the $10 to $15 million a year that it’s due in uncollected sales tax, it could have created 100 to 150 new jobs.

The article concludes with a discussion of how sales tax contributes to state budgets:

Nationally, the cost of running local government is rising faster than tax revenue. Sinking property values are hurting real estate tax collections. Stagnant salaries have kept income tax flat in the states which impose one.

Oklahoma’s cities rely on sales taxes for 55 percent of their budget on average. In some places, sales tax covers more than 90 percent of the local budget.

Arkansas municipalities rely on it heavily too, for close to 50 percent of their income from sales taxes. Slack receipts have driven 15 Arkansas cities to institute sales tax increases so far this year, according to the Arkansas Municipal League.

Texas Comptroller Susan Combs calculates that in fiscal 2010, which ended August 31, her state lost $658 million in uncollected sales taxes. Sales tax contributes 55 percent of the state’s total income. (emphasis added)

These figures are revealing, particularly when you consider the fact that sales tax revenue has been declining for the past decade, due mainly to the increase in online shopping. Add up these three facts—sales tax provides at least 50% (in some places, up to 90%) of city or municipal income in Oklahoma, Arkansas, and Texas; sales tax revenue has been declining for a decade; and in this economy, other sources of revenue, such as income tax and property tax, are also declining—and it becomes clear why 15 Arkansas cities had to raise sales taxes this year. If online retailers were collecting the sales tax that’s already due, those increases would not have occurred.

Near the beginning of the article, Mick Cornett, mayor of Oklahoma City, directs a plea toward Congress: “We need help at the federal level. . . . There’s a limit to what we can do [locally].” If Congress is paying attention to what its counterparts at the state and city level are saying, not to mention to the needs of Americans for new jobs, firefighters, and police, the Main Street Fairness Act should pass soon, by a wide margin.


St. Petersburg (FL) Times: Florida needs Main Street Fairness and Streamlined

October 4, 2011
St. Petersburg Times

St. Petersburg Times: Florida need Streamlined and Main Street Fairness

A new editorial in the St. Petersburg Times urges Florida lawmakers to adopt the simplified sales tax guidelines of the Streamlined Sales and Use Tax Agreement and support the federal Main Street Fairness Act.

The whole editorial is worth reading—it’s not long, and it’s cogent, incisive, and well-argued—but we had to quote this section in its entirety:

For years, every major Florida business group has pushed for the state to join the Streamlined group, rightly arguing the outdated tax code discriminates against their members. While any business with a traditional store in Florida must collect the 6 percent state sales tax on goods, out-of-state online-only merchants don’t. That gives them an enormous pricing advantage. Florida TaxWatch has estimated the shift to e-commerce has cost at least 100,000 Florida jobs. And a University of Tennessee study estimates Florida will lose more than $800 million in uncollected sales taxes this year for goods bought through merchants like Amazon.com.

Even Republican-controlled Texas has joined California and New York in championing this cause of tax fairness. Meanwhile, in Tallahassee, favoring out-of-state carpetbaggers over businesses that employ Floridians is far more acceptable. (emphasis added)

We talked in a recent post about how not collecting sales tax online has cost jobs by keeping funds that might pay for new firefighters and police out of city coffers. In Oklahoma City, for instance, the mayor suggested that online sales tax collection could have created 100 to 150 jobs for firefighters and police officers.

The TaxWatch statistic in this St. Petersburg Times editorial refers to another way that e-commerce is costing jobs. Bricks-and-mortar retailers employ far more people than online retailers. In fact, for every person hired at an online retailer, four would have been hired at a bricks-and-mortar retailer.

We need to level the playing field between online and bricks-and-mortar retailers and give bricks-and-mortar retailers a fighting chance to protect retail jobs.

Take a look at the rest of the St. Petersburg Times editorial. It’s worth a read.


Round-up of recent press on online sales tax collection

October 3, 2011
Recent press

Recent press on online sales tax collection

We’ve been looking at the recent editorials and news articles on online sales tax collection, and we’re encouraged to see that most of them are in favor of it—a position that we’ve long argued to be practical, sensible, and simply right.

From the Tulsa World, “Only fair: Online sales tax is necessary”:

No one likes paying taxes. They are, however, necessary to keep a city and state running. You might not like a sales tax, but you certainly like good roads.

If we’re going to have taxes, it is imperative that everyone pays their share. For years, some shoppers have been skirting local and state sales taxes by purchasing items online that are available locally. That is not fair to those who support local businesses and keep their cities running with local sales taxes. . . .

States and cities . . . need the income that they have coming. Local merchants, who choose to do business here and employ Tulsans and spend their hard-earned money with fellow local merchants and pay their sales taxes, deserve a level playing field. 

From the Bismarck Tribune, “Main Street Fairness Act: A bill to close the sales tax loophole”:

Studies show that states are losing about $23 billion annually in sales taxes. The tax is legally due on purchases but goes uncollected because the seller is not required to collect the tax and the purchaser fails to report and remit the tax due. This situation creates a huge disparity and an extreme disadvantage for our main street retailers who are competing with retailers selling over the Internet or by some other remote means. . . .

The Main Street Fairness Act addresses the issue of fairness and levels the playing field for all retailers. . . .

Cities, counties and state government rely on sales and use tax revenue to provide services to our residents and to build and maintain a high quality infrastructure for the businesses operating here. The Main Street Fairness Act is an important bill for the retail industry and states—it provides for fairness across the retail industry while permitting individual state sovereignty and supporting a fair sales tax system. . . .

The proposed legislation will go a long way to support and encourage growth in our local North Dakota businesses along with main street retail industry across the country. We encourage Sens. Kent Conrad and John Hoeven and Rep. Rick Berg to sign on to the legislation and support it when it comes up for a vote.

From the Detroit Free Press, “Online sales tax collection rules would level playing field and add funds to state”:

Main Street retailers, the backbone of America, stimulate local economies, build communities and provide good, stable, local jobs. In July retailers added 26,000 jobs to the national economy.

However, these jobs are being threatened by online retailers fighting to preserve an unfair price advantage of 6% over brick-and-mortar stores in Michigan. . . .

In today’s marketplace, the shape of commerce is changing, but the rules remain stuck in 1992—well before the era of the iPad, smart phones and even home Internet access. Online-only retailers are exempt from collecting sales tax at every point of purchase. . . .

Many consumers are often unaware that the tax on online and catalogue purchases already exists. When an online retailer fails to collect the sales tax, it falls to the consumer to report that tax directly to the state, which is often not done.

The Center for Business and Economic Research estimates that this year Michigan will lose more than $125 million in revenue due to the Internet sales tax loophole. As legislators grapple to fill budget gaps, this revenue would go a long way toward adequately funding essential public services: paving roads, keeping police and firefighters on the job, and providing our children with a quality education.

States have been compelled to take action in the absence of a national approach to sales tax collection. But a possible solution is the Main Street Fairness Act, introduced in Congress in July. The bill is designed to grant states the authority to set up a simple and equitable system of tax collection on remote sales and, ultimately, the ability to collect these taxes at the point of purchase. . . .

We need a 21st Century framework to ensure a marketplace that benefits online retailers in addition to brick-and-mortar retailers, who provide good local jobs, support our communities and drive America’s economy.

Our country is overdue for a national solution to the issue of sales tax collection.

From Gazette.net (Maryland), “Inaction on Internet sales tax hurts states”:

For Maryland, collecting sales tax on Internet purchases could yield additional revenue estimated to be in excess of $200 million annually, which the state sorely needs to bring budgets into balance given the lagging condition of our local economy and continued structural deficit.

Without this revenue, which is rightfully owed to the state, programs such as Medicaid, K-12 education and our transportation infrastructure needs will be unmet without additional tax increases. . . .

More importantly, though, such a policy change would level a slanted playing field for bricks and mortar retailers who invest in our local communities and currently charge and collect taxes on sales via the Internet. . . .

Moving forward . . . our federal representatives and Congress as an institution should end this debate and do what’s right for state governments and more importantly for countless mom-and-pop retailers that serve as the backbone of our nation’s economy.

From the Midland (MI) Daily News, “Local businesses like proposed Internet sales tax legislation”:

Legislators hope a newly proposed online sales tax bill will equalize what they consider an unfair playing field between Web retailers and small businesses. . . .

Michigan would save up to $141.5 [million] in lost sales tax revenue if the [state] bill becomes law, improve sales at brick-and-mortar retailers by as much as $126 million and create up to 1,600 jobs, according to a report from the Lansing-based Public Sector Consultants.

Jerry Meier, owner of Meier Camera Shop, 122. W. Main St. in Midland, said he cannot believe the state has chosen to miss out on those tax dollars for so long.  “We’ve wondered about this for some time. I think it’s going to make a difference,” Meier said. “Everyone says ‘buy local,’ but when it gets right down to it, they look at (online retailers) as an advantage.”

A 6 percent disadvantage when it comes to sales taxes makes a large difference in the long run, he said. . . .

“Legislators we’ve talked with understand that a sale is a sale is a sale regardless of where it takes place,” said Tom Scott, senior vice president of the Michigan Retailers Association. “Government should not be picking winners and losers by favoring one type of retailer over another — especially when it’s our hometown Michigan retailers who are being hurt by the current situation.”