Congress can bring back fair competition with online sales tax legislation

This Friday marks three years since the Senate voted overwhelmingly to solve the online sales tax loophole, but because nothing has passed in the House, small businesses like mine operate at a competitive disadvantage.

My small business in Virginia has always embraced competition. After all, competition is the cornerstone that makes American entrepreneurship so innovative and powerful. And without a doubt, competing in a new and ever-expanding digital marketplace has made local businesses like mine adapt swiftly and work even harder to achieve success. We are not backing down from the challenges that our modern economy brings. 

{mosads}But we’ll never be as successful as we could be until Congress steps up to ensure that competition in the 21st century is on a level playing field. 

Simply put, our sales tax laws have languished far too long in the pre-Internet age. Because online sellers are not obligated to collect sales tax, local businesses are fighting an uphill battle. This is not an advantage gained through making a better product or offering better service; it is an arbitrary price advantage resulting from tax rules made before the Internet was invented.

It’s a basic failure of fairness. The sales tax system is picking winners and losers while Congress sits idly by. And don’t be mistaken, the online sales tax disparity is having real consequences for community businesses. I know many that are downsizing or even closing their doors, in large part due to our unfair, outdated sales tax laws. 

A lack of physical presence should not exempt online sellers from the basic responsibility brick-and-mortar businesses face to collect sales taxes from purchasers. Our sales tax system shouldn’t create unequal barriers; it should hold businesses of all forms accountable to the jurisdictions where they generate their sales.

A fair sales tax system benefits all of us. It provides much of the revenue states need to fund critical services like education initiatives, repairing our roads and bridges and paying for first responders who keep our communities safe. More importantly, such a system would stave off increases in other taxes made to make up for the uncollected sales tax from many online sales. Under the current system, more and more states are forced to either cut services or raise alternative taxes in order to close the funding gap. 

Congress has the power to fix this. Legislation that enables states to require out-of-state sellers to collect and remit sales tax has been introduced in Congress and even passed the Senate in 2013 with a comfortable bipartisan majority. The Remote Transaction Parity Act (RTPA) is the current bill that would bring necessary consistency to our online sales tax system and allow states to simplify their tax codes. 

Let’s be clear: the RTPA is not a new tax and does not impose an onerous burden on businesses that sell online. It simply allows states to enforce existing sales tax law and makes online retailers subject to the same regulations their local competitors abide by every day. The RTPA even provides free certified software and software upgrades to online retailers to ensure the sales tax collection process is seamless. All it takes is the click of a mouse (or screen) to navigate the tax jurisdictions across the U.S. Furthermore, far from subjecting remote sellers to 50 different audits, the RTPA protects remote sellers from multistate audit liability. 

We should remember local businesses are economic engines for our communities and contribute to statewide job creation. They shouldn’t be forced to operate with one hand tied behind their back because Congress has failed to bring tax rules into the Internet age. It’s time for Congress to act and ensure fair competition in the marketplace. 

Larry Davidson is President of Davidsons Clothing for Men in Roanoke, VA. 



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