As revealed in a past IndependentRetailer.com Business Update, titled, “Business Update: CT Legislation Taxing Topic for Online Retailers,” a competitive business environment requires tax fairness, and it has been far too long that online retail giants, such as Amazon, have been flying under the radar in regards to the collection of state sales tax. Taxable online purchases once an issue in New York, have begun to plague other states such as Connecticut, Texas, South Carolina, and many more.
CT Mirror reporter, Keith Phaneuf, claims, “While the sales tax raised just under $3.1 billion last fiscal year, less than $8.3 million of that involved online sales later reported and paid through consumers’ income tax filings….In all, states lose a total of $7 billion a year in sales tax revenue, according to an analysis by the Center on Budget and Policy Priorities…” Connecticut is plagued with legislative debate, as those local retailers and small businesses facing the competition of online retailers, will be glad to compete on a more level playing field. However, for those 2,800 Connecticut companies affiliated with online retailers the legislation could be devastating, especially if these online retailers decide to avoid the legislation by removing service availability statewide. The exploited loophole continues without state governments taking a firm stand.
In a recent press release, Eric Bearse, spokesman for the Alliance for Main Street Fairness (AMSF), enlightens independent retailers and consumers, “Tax evasion is the Amazon business model. They will go to any length to maintain an unfair tax advantage, even firing employees and affiliates in states where they deny a business presence. The sales tax is the primary source of revenue for the state, and maintaining the equity of that tax is essential to funding services. There is no reason to treat online sales differently than purchases made in a store.”
Taking a Stand: Texas and South Carolina
In Texas, the House passed legislation, ensuring e-fairness by eliminating the state sales tax loophole entitling online retailers to forgo collection of state sales tax. It is an obvious loophole, but one created by U.S. Supreme Court in 1992 in its declaration that a state cannot force a business to collect sales tax if not physically located within the state. By voting 122-23 to pass House Bill 2403 by Rep. John Otto, is attempting to dismantle this loophole with better clarification of the 1992 U.S. Supreme Court decision. In a recent column for statesman.com, Otto explains his bill, “is not a new tax, is not subjecting anybody to a new tax and is not increasing the rate of any tax. What this bill does is put into statute a clearer understanding of what constitutes physical presence.”
In another part of the country, a proposal exempting Amazon from collecting sales tax for five years was brought to vote in the South Carolina House of Representatives Tuesday, April 26. A local television station, WLTX’s website mentions, “The vote tally was 71-47 against.” Although currently in negotiation to build a distribution center in Lexington County, and Amazon promising 1,200 jobs along with the center, the House of Representatives felt a stand needed to be made regardless. Republican Rep. Thad Viers explains, “Every time a business comes to South Carolina or every time a business in South Carolina wants to leave, they will hold this over our heads, hold us hostage. And we’ll be forced to give away these tax give-aways and unfair competition to every business, and I think this sets a very, very bad precedent.” All in all, any deal cut with Amazon, especially when threatening the removal of 1,200 jobs, would lead other companies to believe they could do the same and threaten the state in order to get what they want.