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The U.S. Senate earlier this month took the overdue step of passing a bill designed to level the playing field for retailers.
The U.S. Senate earlier this month took the overdue step of passing a bill designed to level the playing field for retailers.
With support from both sides of the aisle, it voted 69 to 27 in favor of the Marketplace Fairness Act, which would give states the power to require Internet merchants to collect applicable sales taxes even if they don’t have a physical presence in a given jurisdiction. Under current law, which was the subject of a Supreme Court decision two decades ago, e-commerce companies do not have to include such taxes in transactions unless they have a store or other facility in the state.
If the legislation is approved by the House, where its prospects are uncertain, and signed by President Obama, a significant advantage that Web-based merchants, as well as those that sell via catalogues, television and radio, have had over their brick-and-mortar counterparts will be removed. That would be a very meaningful change; in some markets state and local sales taxes together approach 10% of the purchase price. That disparity has prompted a growing number of consumers to shop in stores and buy online, especially when it comes to such big-ticket items as consumer electronics.
The Marketplace Fairness Act would not only put an end to an inequitable situation among retailers, it would provide a windfall for the states, which continue to grapple with budget problems. The National Conference of State Legislatures estimates that state revenues would have been $23 billion higher last year if Internet purchases had been subject to sales tax.
Opponents of the Marketplace Fairness Act contend that it would impose too great a burden on small retailers. That seems unlikely, since businesses with Internet sales of less than $1 million a year are exempt from the law, and states are required to provide software that would help sellers calculate the amount of tax due in each jurisdiction. Another hurdle is the belief that the legislation establishes a new tax, when in point of fact it only facilitates the collection of payments that are already due.
The time is right to put all retailers on an equal footing, and allow consumers to determine the winners and losers based on companies’ ability to meet expectations in such areas as product assortment, shopping experience, service and price.
