When you go online to buy clothing, furnishings, or children’s toys, you may not realize that your simple transaction has become a controversial part of a political fight that threatens to reduce consumer choice and impose chaos on small and mid-size remote sellers.
States around the country have begun to pass a hodge-podge of unconstitutional laws and regulations intended to force online and catalog retail businesses to collect sales tax on your purchases, even if the business has no physical presence in your state. Their attempts to saddle businesses with more regulations and costs are not only contrary to established law; they also are creating uncertainty and confusion for businesses and consumers all over the United States.
Indeed, that’s exactly what’s happening to our company, Colony Brands (originally The Swiss Colony), which has been offering mail order food and merchandise for 90 years. Beginning as a mail order company in 1926 selling cheese and sausage, our company has diversified over the years offering a variety of products via catalog, telephone and online through 11 subsidiaries. And we’re still a family-run business. Some of our more notable catalog/online brands include Montgomery Ward,The Swiss Colony, Seventh Avenue, Midnight Velvet, Ginny’s, Monroe and Main, Country Door, Ashro, One Step Ahead, The Tender Filet and Wisconsin Cheeseman.
State lawmakers want our companies to navigate the vagaries of as many as 10,000 tax jurisdictions and to subject us to 46 state audits and potential legal jeopardy. States, such as South Dakota and Alabama, have already passed laws that attempt to regulate businesses beyond their borders. For South Dakota, a business need only have 200 transactions regardless of the dollar amount of each to fall victim to the state sales tax collection rules. Other states, such as Tennessee and Utah, are considering similar measures.
These actions directly violate established U.S. Supreme Court precedent. In a 1992 ruling in Quill v. North Dakota, the high court declared that a state cannot require a seller to collect and remit sales tax unless that business has a “physical presence” in the state. Luckily, the American Catalog Mailers Association and NetChoice – two industry groups representing remote and online sellers around the country – have sued the state of South Dakota to try to ensure they comply with that decision, and other lawsuits are percolating through the state and federal courts.
But if these laws are allowed to stand and if other states follow their example, companies like Colony Brands and its subsidiaries will have to spend hundreds of thousands of dollars a year to comply – forcing us to make difficult budget decisions about other parts of our business, including whether to sell our products in certain states. Other small and mid-size businesses will find themselves in the same predicament. That’s not just bad for businesses; it’s bad for consumers because competition is what keeps prices down, provides consumers with numerous shopping options they cannot find in stores, and ensures future job growth.
Fortunately, there is hope for consumers and companies like ours. House Judiciary Committee Chairman Bob GoodlatteRobert (Bob) William GoodlatteFight breaks out between Jordan, Nadler over rules about showing video at Garland hearing The job of shielding journalists is not finished Bottom line MORE (R-Va.) has put forward a solution that would create clear, simple, and fair rules for all businesses. Rather than base a system on where customers are located, the Judiciary proposal would require sales tax collection to be driven by the location of the seller. And it would be done using a single rate determined by the customer’s location. Sales tax would still be collected, but sellers would have a simplified way to remit those taxes and they would face audits only from states in which they have a physical presence. This would be vastly simpler than the counterproductive and confusing alternatives favored by some in Congress.
Recently 107 businesses and associations, including Colony Brands, signed a letter in support of the Judiciary approach to remote sales tax collection. But more retailers need to come forward, and consumers should make their voices heard in support of the chairman’s straightforward and balanced proposal. With so little time left this year to convince Congress to act, businesses and consumers should unify behind the Judiciary plan so that we can solve this growing problem once and for all.
John Baumann is president and CEO of Colony Brands.
The views expressed by authors are their own and not the views of The Hill.