Thursday, December 1, 2011

It's time to finally end online tax advantage

While millions of courageous consumers donned elbow pads and confronted Black Friday crowds last week, more shoppers than ever decided Monday to work through Christmas lists the newfangled way – with swipes and clicks on their favorite electronic devices.

Cyber Monday 2011 was the best online shopping day in history, with online sales rising 22 percent to $1.3 billion this year. That’s good news for our sluggish national economy, but for brick-and-mortar businesses closer to home, it’s the season once again to rue revenue that might’ve been.

Last year, local businesses across the country lost billions in sales – and North Carolina lost $190 million in fiscal year tax revenue – because online retailers are not compelled to collect state taxes on purchases. That puts brick-and-mortar businesses at a 5- to 10-percent disadvantage when shoppers start comparing prices, says the Alliance for Main Street Fairness, a national collection of mom-and-pop retailers that’s been joined in their online outrage by retail giants such as Wal-Mart, Target and Best Buy.

On Thursday, four N.C. retailers from the group participated in a conference call with reporters to protest the advantage current laws give to online retailers like The group’s complaint is this: States, including North Carolina, obligate consumers to pay state sales taxes on online purchases, but under a 1992 U.S. Supreme Court ruling, only merchants who have a physical presence in a state are required to collect those taxes. That means states are collecting mostly from consumers who add up all their uncollected online sales taxes and include them on their tax forms each April. You can guess how that’s working out.

Retailers say that physical presence in a state, called a “nexus,” should be redefined in the modern marketplace. Andrew Riddle, owner of Aging in Place in Hendersonville, explained why Thursday: When an Iinternet retailer sells brass bars for a shower to an N.C. consumer, he said, our roads are used to deliver those goods, and our landfills are used for the boxes that are thrown away. That constitutes a nexus, yet the online retailer doesn’t have to collect the sales taxes that Riddle would if he sold the same brass bars.

Now, after years of wrangling with online retailers, Congress is on the edge of a breakthrough, with bi-partisan bills in the U.S. House and Senate. The Senate bill even has the early, critical backing of The bills would allow states to compel Internet retailers to collect taxes, but they would require those states to adopt streamlined and simplified rules that make it easier for online retailers to collect from different states.

The bills each would exempt smaller online retailers from collecting sales taxes. Companies with less than $500,000 in annual online sales get the waiver in the Senate bill. In the House version, which is co-sponsored by N.C. Rep. Renee Elmers, the threshold is $1 million in annual sales.

Those exemptions might elicit a rightful humbug from brick-and-mortar businesses, who receive no such break on collecting sales taxes. But the legislation, overall, is fair, and it would end years of an unlevel playing field. The bills haven’t progressed past the committee stage yet, so there’s no hope for passage this holiday season. But we urge Congress to provide prompt delivery on a new law.


Jim said...

Congress can always find a way to enact a new tax.

Skippy said...

Yep, you copy editors and our politicians really care about the plight of the small business owners alright. Trying to disguise your lust for more tax dollars that will be stripped from the hard working entrepreneurs in order of "fairness" is typical. How about fixing the economy and stop handing out more taxes?

Ghoul said...

When will the Observer Editorial Board advocate the end of the bastion of tax exemption: newspapers! Newspapers sold in paper boxes are sold tax exempt, costing the tax coffers, millions, no billion, no trillions every year! Why is the Observer stealing from the less fortunate> This tax exemption should be lifted immediately and back taxes paid tomorrow for the last 100 years!

Garth Vader said...

The Observer writes:

"North Carolina lost $190 million"

My reply:

You cannot "lose" what you do not already possess. Why is it the Observer's attitude that all money belongs to the government? I know you answer these comments so I would like a serious answer to that question.

cooldela1966 said...

After we take care of the online tax problem we need to get onto the guy that cuts my grass. I pay him in cash and I do not think he is reporting it. I have called the White House and they said they would put several secret agents on him after Christmas. I keep a watch on my neighbors. Each time UPS drops off a package I get the number and report them to the tax authorities just in case they did not pay the sales tax. Each of us must be vigilant so that not one cent of tax money is missed by the government. The government needs the money more than you. Step aside and let those behind you get by. Or something.

Stew said...

Ridiculous assertion that NC "lost" money from a business that is not even present in the state. How about stop wasting all the money that this state is notorious for doing? How about stop spending so much? I live within ten minutes of Fayetteville, and I still have well water. Think I want more tax money going to Raleigh?
Gas in this state is almost $4.00 a gallon, and you folks want to tax anything/everything...and for what?
Most NC journalists are pimps for the LEFT. Just be honest about it, if you can.