Editor's Note: To Tax or Not to Tax
As I write this, the Senate just voted 74-20 to take up the Marketplace Fairness Act for debate and amendment, the bill's first procedural hurdle.
The bill would empower states to require online retailers to collect state and local sales taxes for purchases. The taxes would be remitted to the state where the customer lives. Under current law, states can only require retailers to collect sales taxes if they have a physical presence in the state. Under the bill, online retailers would collect an estimated $22 billion to $24 billion in now uncollected taxes.
While a Senate vote hasn't yet been scheduled (not to mention if and when the House will take up the issue), this is a good time to think about the issue philosophically and decide whose side I'm on, big-box brick-and-mortar retailers or online retailers. As the editor of a publication that targets omnichannel retailers, I'm in a conundrum about whose cause to champion.
Brick-and-mortar retailers hope the bill passes so their online competitors finally have to charge customers sales tax, as they believe they've been at a competitive disadvantage against online giants (e.g., Amazon.com) for years. What's more, old-fashioned mom-and-pop shops are losing money every day to their online counterparts, forcing many to go out of business — not to mention the growing threat they face from "showrooming" consumers.
Online retailers argue that if passed, the Marketplace Fairness Act will alienate their loyal customers by now making them pay sales tax. They're also afraid of the inevitable bookkeeping nightmare that comes with being responsible for tracking more than 9,000 sales tax codes. Online retailers in states with no sales tax — Montana, New Hampshire, Oregon and Delaware — would be forced to build a tax collection system from scratch.
Smaller online retailers would be forced to spend more of what they don't have, namely money and time, by either doing the tax work themselves or paying someone else to do it. What's more, online retailers believe that e-commerce shouldn't be taxed because it has such a light carbon footprint.
Brick-and-mortar retailers, on the other hand, collect sales tax in part because their stores reside in communities and impose costs on those communities. State and municipal governments also regularly provide tax and other benefits (e.g., tax incentives for new store construction, job tax credits, subsidies for utilities and the construction of access roads, etc.) to in-state big-box retailers that aren't made available to remote sellers. Finally, many online retailers believe it's unwise to impose a sales tax on anything in this sluggish economy, especially for purchases made online, which has been one of the few bright spots in the nation's economy the last few years.
In the end, I'm torn on the issue. What's your opinion? Please let me know by sending an email to email@example.com. I'd love to hear from you on this fiercely debated topic.