Should States Be Able to Collect Sales Tax on Goods Sold Online? >
Congress Must Act to Modernize Sales Tax Policy
Online-only retailers are exempt from collecting sales tax at every point of purchase
August 8, 2012
About Michael Kercheval:
Michael Kercheval is the president and chief executive officer of the International Council of Shopping Centers.
Main Street retailers, the backbone of America, stimulate local economies, build communities, and provide good, stable, local jobs. However, these jobs are being threatened by online retailers fighting to preserve an unfair price advantage of as much as 10 percent over brick and mortar retailers.
Local retailers are part of the place we call home. They play an integral part of many civic and charitable organizations and maintain economic stability and our overall quality of life. Online-only retailers have little need or incentive to invest in our cities and towns.
In today's marketplace, the shape of commerce is changing, but the rules remain stuck in 1992—well before the era of the iPad, smart phones, and even home Internet access. Online-only retailers are exempt from collecting sales tax at every point of purchase.
[See a collection of political cartoons on the economy.]
Some argue that online retailing is still a nascent industry, but, in fact, this year alone online sales are expected to grow four times faster than brick and mortar sales. As online retailers exploit an unfair sales tax loophole, communities across the country are hurting and jobs continue to be at risk.
The National Conference of State Legislatures estimates that states will lose $23 billion in uncollected taxes from online sales this year due to the Internet sales tax loophole. As legislators grapple to fill budget gaps, this revenue from taxes that are due would go a long way toward adequately funding essential public services: paving roads, keeping police and firefighters on the job, and providing our children with a quality education.
[Read the U.S. News debate: Is a Flat Tax a Good Idea?]
The Marketplace Fairness Act and the Marketplace Equity Act are two bipartisan bills under consideration in Congress that would help fix this problem. Both proposals simplify the collection process to benefit consumers, retailers and states, while providing an exemption for small online businesses. It's a win-win situation, unless you're a larger online retailer that wants to keep the competitive advantage this tax loophole provides.
The status quo is no longer conducive to a thriving 21st century retail marketplace. A sale is a sale no matter if it happens through the click of a mouse or at a cash register. Congress must act now to modernize our sales tax collection policy to keep pace with the world we live in today. The cost to consumers, states, and Main Street businesses is too great for us to ignore any longer.
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- Other Arguments
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#114121002
No — States should not be allowed to create a privacy-threatening database of our purchases in order to impose taxes outside their borders
DANIEL MITCHELL, Senior Fellow at the Cato Institute
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#21076971
No — A nationally-mandated Internet tax is anything but fair
JIM DEMINT, Republican Senator from South Carolina
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#3973955
No — There are better ways to tax Internet companies while encouraging interstate economic competition
ADAM THIERER, Senior Research Fellow for the Mercatus Center at George Mason University
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#4867854
No — Online sales tax could open a Pandora's box of overzealous collection efforts
ANDREW MOYLAN, Vice President of Government Affairs for the National Taxpayers Union
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#5768832
No — Internet sales tax can do a great deal more economic harm than good.
NEIL NIMAN, Associate Professor of Economics at the University of New Hampshire
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#611911315
Yes — Tax loophole gives online retailers unfair advantage over their brick and mortar competitors
SANDY KENNEDY, President of the Retail Industry Leaders Association
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#7753960
No — States already collect most online sales tax
STEVE DELBIANCO, Executive Director of NetChoice
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#810661303
Yes — Internet businesses should live by the same rules as "mom and pop" stores on Main Street
MICHAEL MAZEROV, Senior Fellow at the Center on Budget and Policy Priorities.
