For years, online-only retailers have enjoyed a significant competitive advantage over their local competitors: they don’t have to collect state sales taxes. This means online retailers can create the illusion of having lower prices than traditional retailers because those online retailers do not, in most instances, collect the same sales taxes that our local brick-and-mortar stores do. And because they do not collect those taxes, they automatically enjoy a 9.75 percent advantage over local businesses.
This is not only unfair; it’s bad for local businesses, communities, and families. It is money that is not available for use in supporting our schools, paving our roads, building our playgrounds, or hiring police officers and firefighters.
The Marketplace Fairness Act would set things right.
Today, online retailers are able to forgo collecting sales tax because of an outdated legal loophole that predates the Internet. It’s time to bring our laws into the 21st century. The Marketplace Fairness Act is a common-sense piece of legislation that levels the competitive retail playing field. It is not a federal sales tax. It is not a tax on the Internet. It is not a new state tax, and it doesn’t increase the sales tax rate. In fact, the law stipulates explicitly that states cannot use it to start taxing goods and services that aren’t already taxed.
All the Marketplace Fairness Act does is give states like Tennessee the ability to enforce our own laws by requiring online retailers to collect and remit the same sales taxes that local retailers are required to collect and remit. If passed into law, it will ensure that all retailers play by the same rules.
This will have a positive impact on local small businesses, as well as the communities—like Oak Ridge—where they do business. These brick-and-mortar stores are the retail backbones of our communities, generating the sales tax that pays for so many public services. They create jobs and generate economic activity, pay taxes, engage in and financially support civic works of every kind.
Right now, these businesses—many of them very small businesses—are struggling in the face of a sluggish economy and their automatic 9.75 percent competitive price disadvantage against online retailers. And to add insult to injury, your local retailers are often victims of “showroomers”—consumers who visit local stores to get their hands on a product, ask questions from knowledgeable sales staff, and then go online and purchase the product to avoid sales tax that your local retailer must add to the price of the same product.
The result? Local businesses shrink, lay off their workforce, and even close in the face of online competition. However, given a chance to compete in a fair marketplace, these same stores can win back customers and once again provide the jobs, growth, revenues, and civic leadership on which our communities depend.
Some critics of the Marketplace Fairness Act claim that it will be burdensome on small businesses. That’s not true. These sales taxes are not new or increasing; customers are supposed to be paying them whether the online seller collects them or not. Moreover, the Marketplace Fairness Act includes a number of small business protections, encouraging entrepreneurship, and streamlining tax collection from multiple jurisdictions. It is legislation that spreads the tax burden over everyone who should be paying it.
Our local stores have waited long enough for a fair marketplace. Attracting more retailers to Oak Ridge has been a goal the city and the Oak Ridge Chamber of Commerce have actively pursued—from the Westcott Center (Kroger Marketplace) under construction to revamping and bringing to new life to the Oak Ridge Mall site. Congress needs to make it easier for businesses that choose to locate and invest here, not more difficult. Fair competition is a good thing; unfair competition is not.
The Senate has already passed the Marketplace Fairness Act, and months ago the Oak Ridge Chamber adopted legislative policies that are consistent with it. Contact your congressman and urge passage of the Marketplace Fairness Act. It’s important for our local businesses, for our schools, and for our city.
Parker Hardy is president and chief executive officer of the Oak Ridge Chamber of Commerce.