Congress Should Even Retail Playing Field
By REP. STEVE WOMACK and REP. JACKIE SPEIER
Black Friday formally kicked off the holiday shopping season and, today, the shopping continues online as we celebrate Cyber Monday. Created in 2005, Cyber Monday has rapidly become one of the biggest online shopping days of the year.
Last year, online retailers had their best holiday season ever, and sales on Cyber Monday alone exceeded $1.25 billion. This year, the National Retail Foundation projects that online sales will grow 12 percent and could exceed $2 billion.
Main Street retailers also have seen holiday sales growth. However, online sales are growing three times faster and are predicted to eclipse brick-and-mortar sales by 2020.
Businesses’ bottom lines often depend on Black Friday and the retail holidays that follow to provide a boost and put them into the “black.” Forty-six states and thousands of local municipalities also depend on these sales to generate tax revenues that support their budgets and the essential services they fund.
But an outdated Supreme Court decision has created a fundamental marketplace unfairness that costs states at least $23 billion every year and is killing our Main Street businesses.
Twenty years ago, when Quill v. North Dakota determined that states could not collect sales tax from remote — or out-of-state — sellers, our shopping habits were drastically different and it would have been impossible to predict how the Internet would change them. The same technology that has allowed the dramatic growth of the online retail marketplace has also significantly reduced the burden of complying with state tax laws.
Today, this relic of a Supreme Court decision allows online-only retailers to avoid collecting and remitting sales taxes. These online sellers are given up to a 10 percent price advantage, instead of competing on the price of the product itself. Consequently, while consumers everywhere are misled into believing their purchases are “tax free,” small retailers have become little more than a “showroom” for their online counterparts.
The responsibility of paying sales and use taxes is shifted to the consumer, who is obligated to track and pay these taxes at the end of the year. But enforcement is virtually impossible and only about three people out of 1,000 actually comply.
In these tough economic times, states are looking to collect what they are owed instead of being forced to raise taxes to support the most basic local services — firefighters, police and even local schools. For this reason, the National Governors Association and the National Conference of State Legislatures have cited e-fairness as their No. 1 legislative priority for the remainder of the 112th Congress.
Small businesses and states alike are suffering, and only Congress has the power to close this loophole. The Marketplace Equity Act of 2011 (H.R. 3179) is the common-sense — and bipartisan — solution.
By granting states the power to enforce their own laws, MEA levels the playing field between brick-and-mortar businesses and online-only retailers and allows customers, rather than the federal government, to pick marketplace winners and losers.
Main Street jobs and the futures of our communities are at stake, and it’s time Congress takes action.
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