There is a movement afoot to level one aspect of the playing field between retailers who are David-size (like us) and the Goliath known as Amazon. We’ve all lost sales to customers who prefer to buy from Amazon because they won’t have to pay local sales tax, which in our case comes to 5.5% — not a small amount on a large item. In theory consumers supposedly pay the tax voluntarily to their own state, but I’m guessing that very few do.

The US Senate passed the Internet Sales Tax law last year, however it hasn’t made it through Congress yet. As it now stands, internet businesses  like Amazon and its affiliates only have to collect sales tax in states in which they have a physical presence, which results in a huge loss of revenue for many states.  In order to rectify this (and to create warehouse jobs) some are trying to woo Amazon to locate a distribution hub within their borders.

The drawback to this is of course that by having a distribution hub in each state, Amazon will be able to compete even more efficiently with local bricks and mortar retailers.  And to add insult to injury, some states — including Wisconsin — are providing Amazon with huge tax breaks in order to attract their facilities.

Amazon has announced that it is now paying sales tax in 19 of the 50 states, so if the Internet Sales Tax law passes it may not make a big difference to their business model.  And in fact Amazon is now supporting the Internet Sales Tax law because it wants to level the playing field with other big online businesses. Amazon has affiliates (and now also warehouses) in enough states that the mega business will soon be paying taxes in the majority of US states — so according to an article by Greg Bensinger in an article in the Wall Street Journal online, Amazon is supporting the bill because it thinks such a law would level the playing field with its e-commerce rivals who don’t have affiliates.

Small retailers who also sell on the web would be faced with the challenge of collecting and paying sales tax on sales to out-of-state customers if the law passes, which has been one argument against having sales tax charged on online sales. But although the job of collecting and reporting sales tax to 50 different states may be an unpleasant one, changing the sales tax law should benefit small retailers as well as Amazon. 

An unlikely advocate in this effort that will help independent retailers is Gary Shapiro, president and CEO of the Consumer Electronics Association.  Large chain electronics stores are of course also being hurt by the fact that sales tax avoidance sends customers to online businesses. “Real competition means everyone playing by the same rules, and that means online retailers, too,” says Shapiro. “It is time for the House to act and change the unfair advantage given to Internet sellers.”

If you agree, please let your representative in Congress know.  We need to make our voices heard in political issues that have an impact on our businesses.

Happy Retailing,

Carol “Orange” Schroeder