Sales Tax fairness - An opportunity for bipartisan cooperation

Where do conservative firebrands like New Jersey Governor Chris Christie and liberal stalwarts like California Governor Jerry Brown find common ground?  Political icons from both ends of the spectrum agree it’s time to close the loophole that requires Main Street merchants to collect sales taxes from customers, while allowing most online retailers to offer tax-free shopping.

Both the Marketplace Equity Act, introduced in the House, and the Marketplace Fairness Act in the Senate would bring long overdue fairness to sales tax collection. The current loophole was created by a 1992 Supreme Court ruling that a state cannot require a retailer to collect sales tax unless the retailer has a physical presence in the state. Issued years before Amazon sold its first book, the decision puts bricks-and-mortar retailers at a price disadvantage compared to online competitors from out of state.

When local retailers lose business, communities lose jobs. One study by the Economics Center in Ohio found that leveling the playing field for local retailers could add 15,000 jobs to the state’s economy—and that’s just in Ohio. Creating a level playing field between brick-and-mortar retailers and online sellers would generate $23 billion nationwide in annual sales tax revenue, a significant boost for depleted state budgets.

Small business owners overwhelmingly support the idea of applying sales taxes fairly and evenly. Jim Adams, owner of Falls Road Running Store in Baltimore, feels the impact of today’s tax disparity: “It really hurts to spend time with a customer in our store, watch them walk out the door with their phone in their hand saying, ‘Well, I think I will buy it from this place on the Internet.’ ”

In St. Louis, Teresa Miller, owner of Treats Unleashed, a pet supply store, has customers tell her every day that they want her to match the prices they get online: “Having to collect sales tax makes that impossible,” she says.

It’s not just small businesses—even major online retailers like Amazon support making sales tax fairness the law of the land. Clearly, the time has come for Congress to act.

At issue here is more than just fairness. Retail remains one of the few bright spots in an overall bleak economy and represents a critical source of jobs.
Retailers support 42 million jobs, or one in every four working Americans, and are responsible for 18 percent of GDP. Retail sales have posted 24 consecutive months of year-over-year growth. And, as was just announced, back-to-school spending is projected to jump by 14 percent over last year and combined K-12 and college spending will generate an estimated $83 billion in sales.

But these positive numbers do not mean that retailers are immune to the challenging economy. Month-to-month retail sales have declined over the past three months and the industry’s prospects for continued success remain fragile.

Congress has the opportunity here to spur economic growth and job creation. Bipartisan agreement doesn’t come along very often these days in Washington. When it does, Congress should seize the opportunity, before the chance is lost in the partisanship of the fall elections.

Shay is president and CEO of the National Retail Federation, the world’s largest retail trade association.

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