OPINION: Our local retailers deserve e-fairnessLocal businesses are in danger. They face unfair, potentially detrimental competition from online-only “mega-retailers” who exploit a loophole in our nation’s sales tax laws to avoid collecting and remitting state sales taxes.
By: Shawn Lyons, Guest columnist
Local businesses are in danger. They face unfair, potentially detrimental competition from online-only “mega-retailers” who exploit a loophole in our nation’s sales tax laws to avoid collecting and remitting state sales taxes.
Skipping out on sales tax collection may be a profitable business model, but it is also proving to be an undeniable hazard to our local businesses, the jobs they support, and the communities they enrich.
Right now, online-only retailers — think Amazon or eBay — are able to avoid collecting state sales taxes because of an outdated Supreme Court decision made in 1992, which determined that catalog companies should not be required to collect a state’s sales tax if they do not have a physical presence in the state. Internet-only retailers have been able to fly under the radar, not collecting state sales taxes by claiming they do not have a physical presence in most states. This gives online retailers as much as a 10 percent price advantage over Main Street businesses.
When the Internet was in its infancy and e-commerce still a developing presence in our economy, it made sense to give online retailers a break by not requiring them to collect sales tax — plus, the technology to do so just wasn’t there.
Every single one of those factors has changed. We all live in the Internet age, ecommerce is a force to be reckoned with, and tax software is available that would make it easy for online-only retailers to comply with local and state sales tax laws across the country.
Because their prices seem cheaper, more people are turning away from Main Street and toward the Internet to meet their shopping needs. This means local businesses continue to suffer, resulting in job losses, the abandonment of “mom-and-pop” shops, and the continued deterioration of our nation’s communities.
When all is said and done, the “tax-free” shopping isn’t even tax free. Consumers still owe the tax for online shopping that does not include sales tax, although many don’t even realize it.
As if that weren’t bad enough, the uncollected revenue from these online sales adds up to hundreds of millions of dollars. In South Dakota, it’s $60.8 million per year alone according to the FY ’12 projections by the National Council of State Legislatures. That is much-needed revenue that could be used to better our communities and offset broader sales tax increases currently under consideration on the ballot.
There is no reason why our government should give one type of business an unfair advantage over all other businesses. Our economy was built on the free market, so we should be letting the free market decide which businesses win or lose, not the government. We need Congress to level the playing field and restore fairness to the retail marketplace.
Luckily, they can do just that by passing efairness legislation, such as the Marketplace Fairness & Marketplace Equity Acts. Passing such legislation would allow states to require online-only businesses to collect their sales tax just like every other business in the state. And this doesn’t create a new or increase in sales tax.
Local businesses, such as those represented by the South Dakota Retailers Association, are about more than just selling goods and services — they provide muchneeded jobs and support the communities in which they are embedded through civic involvement and charitable giving.
These businesses are the backbone of the economy — they need our protection, patronage, and support.
We can only hope that all of South Dakota’s congressional delegation will take a stand for our local businesses by supporting and passing e-fairness legislation, sooner rather than later.
Shawn Lyons is the executive director of the South Dakota Retailers Association, based in Pierre.