Teague: Online sales-tax collection levels playing field

The Washington Legislature can truly help struggling local businesses by approving online sales tax collections before lawmakers adjourn their 2017 session.

Small businesses supporting their communities throughout the state are currently getting beaten by out-of-state online sellers who unfairly compete by not collecting sales taxes that are due in Washington state. That could change under a budget plan the Legislature is considering. Retailers urge the Legislature and governor to require these online sellers to collect those taxes.

If something isn’t done soon to address this unfair system, traditional brick-and-mortar small businesses across the state will continue to fail and hurt state and local economies.

It’s important to remember that the proposal, if approved, would not be a new state tax. It would simply require out-of-state online sellers to collect or report owed Washington state sales taxes. Under the proposal, affected retailers of more than $10,000 in sales per year would have the option to collect and remit the sales taxes or report the sales to the state.

Such an outcome would have great impact for at least two reasons.

First of all, sales lost due to the unfair price advantage are forcing layoffs and threatening the survival of law-abiding brick-and-mortar retailers, particularly small businesses. Many of these endangered stores are the ones where the employees get to know your name because they live in the same communities where they work. They sponsor Little League teams and support their local schools.

Traditional retailers do not fear equal competition from online sellers, but are increasingly worried about how long they can hold out in a marketplace of different rules for online sellers.

Many, but not all, online sellers do collect sales taxes. If all were required to, some estimates are that Washington state could recover as much as $1 billion a year in owed revenues. That’s a considerable second benefit.

Washington is not alone is seeking such legislation. Colorado has a sales tax for online retailers and other states also are considering such a law.

Washington really doesn’t have time to wait on this issue. Legislators have been struggling mightily the past several sessions to find enough revenue to fully fund schools or remain in contempt of a state Supreme Court mandate to do so. Had the state passed an online sellers law a few years ago, legislators might already have solved the challenge to fully fund state schools.

Traditional retailers across the state are depending upon the Legislature to level the competitive playing field so that they can fairly earn sales under the same rules. Retailers should urge the Legislature to act quickly, not only for their benefit but also to help the state meet its obligations to taxpayers.