Internet Sales Tax: Leveling the Playing Field

In December 3^rd, the Supreme Court let stand a lower court’s ruling that states can tax online retailers even if they don’t have a physical presence in that state.

This is the beginning of the end for a needless unfair advantage that has hurt the retailers that are the backbone of this country’s economy. This is also a win for all communities themselves that have been hurt by the loss of revenue that is needed to build roads and schools, pay the salaries of teachers and first responders, and all the other services that we all depend on.

Now what’s required is the passage of the Marketplace Fairness Act of 2013. The Senate has passed it, but the House has yet to act on it. It has some bipartisan support, though some view it as a tax increase, something Howard Gleckman of Forbes magazine points out isn’t true: “Buyers owe tax already on their online purchases. Even if sellers don’t collect it, consumers must pay what’s called a use tax, though few do… it is tough to argue that making people pay a tax they already owe is a tax increase,” he wrote.

Over the years there has been one common refrain from brick and mortar MI retailers – the desire for a “level playing field” in regards to state taxes on purchases. Retailers can provide a good shopping environment, they can provide the right product, and they can even match MAP prices. But they have always had to collect sales tax.

As a Chicago guitar shop owner told me years ago, being in that city means an additional 11 percent is put on the purchase. So if that purchase is a $2,500 guitar, there’s a $275 advantage to buying the same instrument online. In last month’s “50 Dealer/50 State” annual feature, several retailers mentioned that passage of the Marketplace Fairness Act was an evolution they’d like to see happen this year.

In 1998, the Internet Tax Freedom Act was passed to support the new technology… you know, to see if this whole “Internet” thing would catch on. Well, I think it’s safe to say it has. That this issue continues to drag on is counterproductive and unfair. The Supreme Court has had its say, and 13 states already require taxes be paid by the seller, so Congress needs to act once and for all.

Let’s just hope it’s not too late.