Source: USA TODAY
Major retailers and local stores will be the big winners if the House follows the Senate and requires Internet retailers to collect sales taxes on online purchases.
National and regional chains are tired of being showrooms for shoppers who then search their smartphones for lower prices and buy online. The chains say they are at a 5% to 10% price disadvantage by having to charge sales tax.
“Retailers compete for customers on many different levels, distribution channels and fronts, including service and selection, but they cannot compete on sales tax,” says Stephen Sadove, chairman of the board of the National Retail Federation and CEO of Saks Fifth Avenue. “Retailers of all shapes, sizes and channels deserve a level playing field.”
Local stores are sick of having to compete with online retailers who only have to charge sales tax to consumers in states where they have a physical presence.
“For too long the Main Street retailers that are an integral part of their communities have faced tax rules that put them at a disadvantage to their out of state, online-only competitors,” said Bill Hughes, government affairs chief for the Retail Industry Leaders Association.
And states would get new revenue. According to research from the University of Tennessee, states are missed out on more than $11 billion in uncollected taxes in 2012 from online purchases, .
It’s Web retailers that sell more than $1 million a year — the threshold set in the law for sellers to collect the taxes — to out-of-state buyers that will feel the biggest pinch. They say it’s too burdensome to collect taxes for multiple states, even with state-provided software called for in the bill. Some say they will need more employees just to deal with sales tax; many say they will have to rethink their whole business strategy.
Ebay.com, where many small retailers conduct their businesses, has been one of the the loudest opponents of the legislation and vowed late Monday to keep lobbying to bring “greater balance to the legislation.”
Small businesses with less than $10 million in sales or fewer than 50 employees should be “protected from new burdens that harm their ability to compete and grow,” said Brian Bieron, Ebay’s senior director of global public policy.
Shoppers, of course, will get dinged. They already are supposed to be paying tax on their online purchases when they file their state tax returns, but few ever do. And some experts doubt their online buying habits will change much because of sales tax.
“At the end of the day, people love shopping online,” says Lisa Lee Freeman, editor in chief of Consumer Reports’ ShopSmart magazine. “There will be some initial promotions to counteract the taxes and then it will be back to business as usual.”
Some businesses that are neither major chains nor mom-and-pops, also see a benefit in a national tax approach. David Bolotsky, CEO of UncommonGoods.com, says his gift-oriented site sells more than $10 million a year to consumers outside of his home state of New York.
As it is now, “we have to monitor all the rules and spend money on lawyers trying to make sure we are in compliance with every state’s regulations,” says Bolotsky, a former head of retail research at Goldman Sachs.