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Shapiro: Online Sales Tax Balances the Markets

The Internet has changed the way we shop, and, in doing so, has created an inequality between brick-and-mortar businesses and online retailers. Unlike traditional storefronts, online retailers do not collect taxes from customers unless the customer is in a state where the retailer has a physical store location. This inequality between physical and online retailers has hurt Main Street businesses by giving online retailers’ an unfair tax advantage.

Sen. Michael B. Enzi, R-Wyo., explained the problem when he said, “For over a decade, congressional inaction has created one of the largest tax loopholes of our lifetime. The federal government should not favor some businesses over other businesses and some taxpayers over other taxpayers. It’s time to stop discriminating through the tax code and put local and Main Street retailers on a level playing field with their out-of-state and online counterparts.”

However, Congress hopes to give jobs-creating brick-and-mortar retailers a chance with the Marketplace Fairness Act, a bipartisan bill introduced in February that would give states and localities the ability to enforce their existing tax laws.

Opponents of the bill say calculating the sales tax for multiple districts will be too difficult. On the surface, this is a fair point, but also ignores the reality that technology and innovation can solve the problem with relative ease.

Proponents of the bill rightly argue that it creates fair competition, promotes states’ rights and prevents the government from being able to pick winners and losers in the marketplace. Many notable retailers — Amazon, Best Buy, Barnes & Noble, Home Depot, Target and Wal-Mart — have lent their support to the bill. In fact, Amazon Vice President Paul Misener wrote a letter thanking the Senate for the bill, which he said would “allow states with simplified rules to require sales tax collection by out-of-state sellers who choose to make sales to in-state buyers.”

Not only does the bill serve as a way to support hometown, brick-and-mortar businesses, but on a broader scale it will help to boost the economy. Governments lose an estimated $23 billion a year from uncollected taxes on online sales. According to one of the bill’s co-sponsors, Rep. Jackie Speier, D-Calif., under California’s “Amazon tax,” the state has been able to collect in one month what it previously expected to collect in one year. “The Marketplace Fairness Act of 2013 represents a fair and workable solution to a problem that has been growing since online retailers opened their virtual doors,” Speier said.

The bill will not create or increase taxes; it simply treats retailers the same and creates a reliable means to collect sales taxes already on the books. The money, which is owed to states anyway, can be used to help fund state governments for critical programs and services, all without actually raising taxes.

I commend congressional leadership for their commitment to enact this legislation that will level the playing field and require all retailers to collect owed sales taxes. It’s a no-brainer fix for state budgets that are hurting. Now is the time to give states the ability to collect this much-needed, and legally due, source of revenue.

Gary Shapiro is president and CEO of the Consumer Electronics Association.

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