Local businesses squeezed by out-of-state online competitors’ unfair advantage
Shopping online is a simple and convenient way to make purchases. The Idaho Retailers Association fully supports online shopping, and we encourage all our members to develop an online presence to compete in today’s marketplace. What we do not support is the unfair advantage some out-of-state online retailers have over local businesses by not being required to collect sales tax.
Idaho, like most states, requires sales tax be paid on online purchases. But a court decision made years before the e-commerce boom created an unfair standard of tax laws, granting a special advantage to online retailers: They are not required to collect the sales taxes that brick-and-mortar retailers do. Citizens are supposed to pay these taxes proactively, but most people don’t even know that they are supposed to.
What this means is that Idaho’s traditional retailers face competition online from merchants who can create the appearance of cheaper prices by not including sales taxes in the final price. Idaho retailers are losing customers, money – and sometimes their shirts.
Already passed by the Senate, and if passed by the House as well and signed into law, it would be a significant victory for local retailers, for the communities where they reside and work and for fairness. It would also have significant positive results for the state. According to the National Conference of State Legislatures, Idaho had $103.1 million in uncollected sales tax revenue in 2012 because of purchases made online. These funds can and should be going toward tax relief for citizens, and education, transportation and infrastructure.
The Marketplace Fairness Act is not a new tax. It simply would allow individual states to require online vendors to collect and remit the sales tax owed for online purchases like traditional retailers have been doing for decades. These taxes are already due; they are just going uncollected. The Marketplace Fairness Act would level the playing field for the kinds of businesses that line our city streets, employ our neighbors and invest in our communities.
Idaho Camera in Boise is a great example of a business that knows first-hand how the status quo hurts local companies. Potential customers use the staff’s expertise to learn about products before leaving the store to buy online from a “cheaper,” out-of-state vendor. Consider a customer purchasing a $1,000 camera: With a 6 percent sales tax, they can pay $60 less online. This is a massive, government-mandated pricing advantage.
The Marketplace Fairness Act has been crafted to protect small online entrepreneurs, including a $1 million annual exemption. Roughly 99 percent of sellers who sell goods through eBay will not be affected by this legislation at all. For the remaining 1 percent, technology exists to collect state sales taxes, including software to help calculate the taxes owed to each jurisdiction.
It is time to stand with Main Street and restore fairness to all retailers, whether they sell online or in our communities. Idaho’s local businesses are suffering due to out-of-state, online-only retailers who have been able to avoid collecting state sales tax. This legislation includes no new taxes or government spending. It simply returns each state the power to enforce its own tax laws and requires everyone to play by the same rules in our free market system.
The Idaho Retailers Association is asking our Idaho representatives to join in supporting the establishments that make up and invest in our communities. We are asking that Congress end special treatment for online and out-of-state sales. All businesses must be given the chance to succeed and grow. We exist in a 21st century marketplace, and the law must reflect this reality.
Even Amazon.com and other online companies have joined the fight for a freer, fairer and simpler marketplace. It’s time for Congress to act by passing the Marketplace Fairness Act.
Pam Eaton is the president and chief executive officer of the Idaho Retailers Association.