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Today, online retailers are able to forgo collecting sales tax because of an outdated legal loophole that predates the Internet.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 “showroomersâ€â€”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.
Andrew Howe says
I’ve heard these arguments before, or the direction they’re coming from, and must disagree with not only the stated reasoning for the legislation, but also the stated outcome.
Their’s a presumption that online retailers have an unfair advantage. I agree they have an advantage, however it is NOT unfair. Why? Because physical store owners have every option to enter into the online realm themselves. Most stores do this already, they aren’t just on one side of the fence, they are actually on both. So basically, the ‘fairness’ aspect isn’t fair itself as a point in favor of the new legislation – there are no restrictions either side of the store-vs-estore fence.
This is ‘two-market’ system is actually HOW a company can make a profit off of ‘showroomers’. Wise shop owners would create an online portal with prices a less than their showroom prices. If they price their online items competitively they could grab ALL the purchases across the entire country.
It’s almost like there are two distinct market places – physical and electronic – because there are. And there’s nothing wrong with that, nor is it fundamentally wrong for the rules of each market to differ.
As a musician and a gear-head, I frequent GuitarCenter.com quite often, the online store for the Guitar Center chain. They have made a business model BASED on ‘showroomers’ because they used their walk-in customers to build an online customer base. They’ve had to shut down some physical stores, but their overall business is surviving partly BECAUSE of the lax tax laws on online retail.
The new legislation wouldn’t, in my mind, really help do anything but cut into the profit margin for online retailers (and it MAY actually ruin businesses like Guitar Center who’s margins are tight and who’s online presence is a primary component to their overall company’s success). And the legislation is NOT going to do much to help physical storefronts – the prices will STILL be much lower online because physical storefronts STILL have that physical overhead.
What it comes down to is that today’s world is slowing becoming more electronic – store’s included. To own a physical storefront means you automatically have more overhead than a pure online retailer and thus you simply will NOT be able to compete with their prices (in general – odd items, local crafts, etc, may be outliers).
The new legislation will decrease the disparity, for sure, but only by punishing the people with online stores, and not so much by actually helping physical storefronts.
If you REALLY want to even the field, you need to ‘flip’ the situation: physical stores WOULDN’T collect taxes while online retailers would (or by some percentages). That would be one way to reduce physical storefront overhead while increasing eStore overhead – thus actually leveling the field.
And of course, this isn’t about ‘fairness’ to physical store owners much anyway. The white elephant is always “revenue” for the govt, and it is here as well. This is all about taking more money from the citizenry and putting it into the local, state and fed bankrolls.
I say “no”. Not because I want to deprive our govt of needed funds for needed programs, but because our govt has proven itself AWFUL at managing the money it already gets. I think it’s high time our govt learn how to function on a more limited budget. And if we keep on voting to give them more and more money to cover their terrible waste, they’ll simply never learn how to actually balance a budget.
If WE the citizens must get by on less, primarily because of decisions the fed govt has made over the past 20 years, it’s only fair that the govt learns to get by on less, too.
Residents first.
Philip W Nipper says
Well done!
David A. Vudragovich says
The taxes are local, not federal, they are county and Oak Ridge School tax money (aka, can be used to offset property taxes right?). The feds mis spending has nothing to do with these taxes.
If you order online, depending on where the business is, sometimes buyers get taxed currently. I had a friend place an order at Amazon and part of the order came from TN and was taxed and part came from outside the state and it was not taxed. The problem with the tax from the TN distribution location, best we could figure, it stayed where ever it shipped from. It did not help out our county/city.
I heard some discussion of this last year and I am not sure I trust the gov’t to properly get all the money back to all the right counties.
If we were “to ‘flip’ the situation”, who would get the tax dollars? Would you suggest it go back to the purchaser’s community? The community where the online business is located?
Right now you buy a car, you pay tax based on the county you live in. You live in Anderson and go to a county with lower taxes (for arguments sake, that is the best deal on a used car you want) you still pay Anderson County tax rates and if I remember correctly the tax money goes back to Anderson County.
While I love loopholes that benefit me, if the items are supposed to be taxed, tax them. Maybe if that had been happening for the last 18 years, there would already be new sewers in place!
Andrew Howe says
I’d hope sale taxes would stay very local. The smaller the size of govt handling the money, the better.
It makes sense the tax from the Amazon purchase stayed at the company’s location. Otherwise a company in your town would only make money for your town from local purchases.
So that makes your story of the car seem wrong, to me at least. Unless you’re talking about a “road tax” and not the sales tax. I’d think the road tax, since you’re driving in Anderson County, would go to Anderson County.