For far too long, brick-and-mortar businesses have had to compete without the benefit of a level playing field in the marketplace.
Online retailers — often major competitors of local businesses — are allowed to forgo collecting sales taxes, unlike local retailers, who must collect and remit this tax.
This current disparity in tax law is driving small businesses around the country out of business. Congress needs to pass e-fairness legislation to give states the ability to collect these taxes online, as soon as possible.
Why is this issue so important? Small businesses are the backbones of our communities. They do everything from providing economic activity and jobs to leading charitable efforts and sponsoring local Little League teams. Without these businesses, our communities will continue to decay. But with vibrant local businesses, our communities can thrive and grow again.
By not having to collect sales tax, online retailers create the illusion of better prices, unfairly drawing customers away from traditional stores. As this happens, local stores shrink, Utah citizens lose jobs, and main street retailers go out of business.
Some e-fairness detractors like to make the argument that the Marketplace Fairness Act would constitute a new tax or a tax increase. This is clearly not the case: The taxes in question are already on the books, they are just going uncollected online. The bill would give states the power to collect, nothing more.
Others argue that this is taxation without representation. Again, this is clearly not the case: Online consumers will be paying taxes to the jurisdictions in which they live, where they receive government services and where they vote.
Finally, opponents of sale tax fairness will often claim that they are in favor of Congressional action while at the same time demanding unreasonable provisions be added to the bill. Because online merchants realize they enjoy an unfair advantage, they demand perfection in the proposed solution knowing their demands are the very stumbling blocks that will keep the bill from ever becoming law.
In fact, e-fairness could help cut taxes for Utahns and spur the economy. In 2013 State Senator Wayne Harper, R-Taylorsville, sponsored S.B. 58, which creates a restricted account for all sales tax revenue collected from online merchants and suggests the revenue be used to cut taxes on Utahns.
According to universally respected Reagan Administration economist Arthur Laffer and economist Donna Arduin, if the Marketplace Fairness Act were to become law, and the Utah State Legislature used these revenues to cut taxes as outlined in SB 58, we could grow our economy by $5.9 billion and add nearly 17,000 new jobs over the next decade.
The Marketplace Fairness Act passed in the U.S. Senate earlier this year with overwhelming bipartisan support, and is currently residing in the U.S. House’s Judiciary Committee, where Chairman Bob Goodlatte, R-Va., has released a series of principles to help guide further development of the bill.
The legislation had real momentum through the summer, but like many such initiatives stalled in the face of the government shutdown.
With the shutdown over — and being in the midst of the holiday shopping season that plays such a significant role in a retail business’ success or failure each year — it’s time for Congress to once again take up the issue of e-fairness and pass legislation to finally close the online sales tax loophole.
The holidays should be a time for celebration, but without a level playing field, many local businesses will be left with nothing but coal in their stocking.
It’s up to Congress to make the season merry and bright for all retailers, no matter where they do business.
Dave Davis is the president and chief legal officer of the Utah Retail Merchants Association and the Utah Food Industry Association.
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