Small-business owners like myself have for years urged Congress to create a level playing field that will allow us to compete with our online-only competitors. One year ago this week, the Senate overwhelmingly passed legislation that would accomplish this goal, and we’re counting on the Republican-led House of Representatives to do the same.
Thanks to an antiquated tax loophole, large out-of-state online retailers can avoid collecting state sales tax on purchases made by residents in my state, which gives them a significant 9.75 percent competitive advantage over traditional brick-and-mortar shops that follow the law and collect those taxes.
To fix this unfair system, a bipartisan group of 69 senators last year passed the Marketplace Fairness Act, a common-sense reform that would ensure all businesses play by the same rules. Unfortunately, the legislation has stalled in the House.
As each week passes with no action, brick-and-mortar businesses continue losing sales to a common practice known as “showrooming,” in which customers browse and test items at local stores and then head home to buy them online knowing they will not have to pay state sales tax.
For many small businesses such as mine, every sale counts and losing this revenue hurts our ability to grow our businesses and hire new employees. We cannot wait any longer for a federal solution to this problem.
Main Street business owners are not asking for a handout, and we’re certainly not afraid of competition from the big guys. But it simply does not make sense for out-of-state online retailers to enjoy such a big competitive edge over local businesses that give back to their communities.
Despite what some have said about the Marketplace Fairness Act, this is not a new tax, nor does it create any taxes. These taxes are already on the books, and the legislation would simply give states the necessary tools to collect them. As conservative Republican Rep. Steve Womack of Arkansas has said, “It’s not new, it’s due!”
Not only does this level the playing field for all businesses, but it would also put additional revenues in state coffers to fund vital services such as education and public safety.
Importantly, the legislation also includes a $1 million exemption on remote sales so to put that into perspective, over 99 percent of all online sellers will not be affected by this legislation in any way. In other words, all the mom and pop stores who do business on the Internet don’t have to worry about it.
Additionally, for the less than 1 percent of online sellers who will be subject to collecting sales and use taxes under this bill, the legislation requires each participating state to provide free tax software that will allow them to quickly and efficiently calculate, collect and remit sales tax. The proposal also includes liability protections for sellers and limits against audits.
This reform is long overdue, and Main Street businesses cannot wait any longer for help. For those who believe in state’s rights and the basic principle of limited government, we should all agree that Washington, D.C., should no longer be in the business of picking winners and losers in the marketplace.