On Main Street or in Cyberspace, a sale is a sale

 “All May Park, All Must Pay.”  That sign adorns parking meters in cities across America, sending the clear, concise message that everyone is treated equally. Whether car or truck, sedan or coup, Ford or Chevy, the rule applies and the fee is owed.  No special deals, no loop-holes; it’s simple: if you park, you pay.  The kind of equal treatment afforded city parkers is exactly what Main Street retailers have long been denied and what bipartisan legislation introduced this week in the Senate seeks to correct.

 A sale is a sale, whether it happens at a store on Main Street or with a click online. States have long required that sales tax be paid on both purchases. However, while Main Street retailers are obligated to collect sales tax on each purchase, their online peers are often not. So while a tax is still legally owed in both instances, it is not always collected by online retailers. This results in a perceived price advantage of up to 10 percent for some online retailers over their Main Street competitors. Make no mistake, the tax is still owed, but because of a decades old loophole, the obligation instead falls to consumers to maintain records of online purchases and pay the sales tax when they file their state income taxes for that year.  Not surprisingly, most fail to do so.

 In a free market, government shouldn’t pick winners and losers.  But by excusing online retailers of the same obligations imposed on Main Street retailers, government is doing just that.  This special treatment undermines competition and puts an unnecessary strain on the retailers on Main Street who create jobs and contribute significantly to communities.

 Some argue that collecting sales tax online is too complicated and burdensome. This just isn’t true.  Today Main Street retailers who also sell online are obligated to collect sales tax on all sales that occur on their websites.  Several online-only retailers do so as well voluntarily.  Others, such as Amazon.com, have spent millions fighting efforts to end this special treatment and won’t act until they are compelled to do so.

 For years, retailers and states have sought to level this playing field and Congress has stood in the way.  The Marketplace Fairness Act that was introduced last week by Senators Mike Enzi (R-WY), Dick Durbin (D-IL), Lamar Alexander (R-TN), and Tim Johnson (D-SD) would remove the federal government as an impediment to states, and give states the authority to level the playing field. This approach is similar to legislation introduced in the House last month by Reps. Steve Womack (R-AR) and Jackie Speier (D-CA).  These bills would lift the heavy thumb of the federal government off of the scale, and frees states to apply the sales tax collection rules evenly to ensure that competition, not government, is the force that determines success or failure.

 
This 20-year-old loophole makes no sense in today’s marketplace. Technology has dramatically simplified the task of collecting and remitting sales tax, and e-commerce is booming.  At $165 billion in online sales, e-commerce is no longer in diapers and should not be coddled by the federal government.

 The time has come to end the special treatment of online retailers and to give states the right to treat all retailers equally.

 

Sandy Kennedy is the President of the Retail Industry Leaders Association (RILA).

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