Requiring all Internet retailers to collect sales tax on every purchase made online would level the playing field with bricks-and-mortar businesses, create an estimated 11,000 retail jobs across Ohio and give states and counties a much-needed revenue boost, according to proponents of a bill dubbed the “Marketplace Fairness Act” that will receive its first hearing Wednesday in the U.S. Senate.
Both the senate bill and companion legislation pending in the U.S. House of Representatives have attracted Democrat and Republican sponsors, and are supported by a strange-bedfellows coalition that includes retailers’ groups, small-business owners, Wal-Mart and — somewhat surprisingly — Amazon, which would rather see a federal solution than a patchwork of state collection procedures.
But another coalition led by NetChoice, a Washington, D.C., group of trade association and e-commerce sites including eBay and Facebook, disagrees, saying that lawmakers “have created a poison pill for the Internet, consumers, and – worst of all – the very small businesses the bill seeks to help,” according to NetChoice Executive Director Steve DelBianco.
Mike Becker, owner of Langmiller Diamonds, said he supports any effort to get such a measure before lawmakers.
“I’m all for it because that’s probably our biggest competition is online Internet sales,” Becker said. “I think it would make people in the communities more loyal to the local businesses.”
Taxing those selling their wares online would help “level the playing field” between them and brick-and-mortar businesses, according to Jeff Pohlman, president of Pohlman Tire & Auto Service, which has locations in Middletown, Hamilton, Fairfield and Oxford.
Pohlman said he’s seen online sales of tires grow noticeably stronger in the past two to three years. He’s glad that business owners “took the bull by the horns” and got a measure before lawmakers.
“It’s something that’s been an issue with all the retailers for quite some time,” Pohlman said. “It definitely will help our business because people will be less prone to buy off the Internet knowing that they’ll pay the tax.”
Local buyers of online goods are supposed to keep track of online sales and record the totals on state income tax forms. But less than 1 percent of Ohio taxpayers do that, even though more than 60 percent of filers purchase items online, according to a 2010 survey. A University of Cincinnati study projected that the failure to collect sales tax from all online retailers cost Ohio more than $200 million in 2011, according to the Alliance for Main Street Fairness.
People locating businesses at only two or three sites to sell products to customers online have “a tremendous advantage” over their competitors in local communities, according to Bill Triick, president and CEO of the Chamber of Commerce Serving Middletown, Monroe & Trenton.
“If they’re located in one community and they’re able to sell all around the country and not pay local taxes that their competitor for the exact same thing … has to pay a significant tax for, it doesn’t seem fair,” Triick said.
Kert Radel, president and CEO of the Fairfield Chamber of Commerce, said he supports any legislation that will benefit the business community.
Radel said he advises area business owners to emphasize that they offer services not available to those making purchases on the Internet.
The longevity and reliability of a brick-and-mortar storefront also is an appealing feature for customers, especially for larger ticket items such as jewelry, he said.
“You need to have somebody that you know was there yesterday, is here today and will be there tomorrow,” Radel said. “There’s not 100 percent truth in advertising on the Internet. When you’re buying online, you have to be in the mode of buyer beware of what you’re purchasing and how does it look in that picture … because when you’re holding it in your hand, it could be a whole different story.”
NetChoice’s DelBianco told a congressional committee last week that, “The argument that remote sellers have an unfair advantage just doesn’t hold up. Paying sales tax for thousands of jurisdictions in 46 states in far more expensive and complex than paying sales tax for a single jurisdiction on over-the-counter purchases.” Tod Cohen, eBay’s vice president for government relations and deputy general counsel, told InternetRetailer.com, “It does not make sense to expand Internet sales tax burdens on small businesses at a time when we want entrepreneurs to create jobs and economic activity.”
But the political winds may be shifting on the issue. Two weeks ago, the Wall Street Journal published a story under a headline of “Tax Break Nears End For Online Shoppers” about key Republican governors, including New Jersey Gov. Chris Christie, dropping their longtime opposition to imposing sales taxes on online purchases.
Rob Nichols, spokesman for Ohio Gov. John Kasich, said Tuesday that the governor has not taken a position on the federal legislation. “We’re following (the issue) closely,” Nichols said.