It’s been nearly four years since legislation to tax Internet purchases was first introduced in Congress. And still, the measure is introduced and doesn’t progress.
During the legislation’s most successful run in 2013, the then-Democratic-led Senate voted 69-27 to pass it. When the measure moved to the majority-Republican House, it stalled. The opposition by Republicans — whose representatives run overwhelmingly on a business platform — is a philosophical one. The Grand Old Party eschews any new tax.
This year’s legislation, similar to the 2013 bill, currently sits in the House Judiciary Committee. Even if it moves to a vote in the full House before the legislative session’s scheduled end on Dec. 18, it will face opposition in the now Republican-run Senate. Besides, that chamber has its own bill, introduced by Senators Mike Enzi (R-Wy.) and Dick Durbin (D-Ill.) in March.
But would this tax help brick-and-mortar stores, which struggle to compete with those Internet sellers that undercut retail prices and many times waive tax and shipping charges?
The answer is complicated.
“We’re not sure it’s going to [impact retailers],” said Rod Sterling, COO of the Pool Retailers Cooperative, based in Memphis, Tenn. “… All we want is a level playing field.”
While taxing the goods traveling from a virtual seller could send some customers back to their local brick-and-mortar locations, Sterling said consumers have long found ways to skirt the levies. Those living along state borders, for instance, would travel across the border to buy goods and ship them home without paying tax. This makes it unclear how much collecting sales tax from online sales might help retailers.
For big-ticket items or volume sales, though, retailers are clear that a tax of online goods would be a change they’d like. “It is pretty impactful when you’re selling a $10,000 hot tub or a pool,” said Jim Ornce, retail division manager of Pettis Pool & Patio, with locations in Hilton and East Rochester, N.Y.
Sales tax in his state varies by municipality, but most areas charge 8- to 9 percent. That’s an $800 to $900 difference for a $10,000 spa.
Additionally, stores spend thousands of dollars to run free water tests for customers who often don’t buy the recommended chemicals at the store, instead turning to the Internet.
“The fact that there is no sales tax is salt in the wound,” Ornce said.
But taxing all goods sold online is only one puzzle piece of the competition between physical and virtual sellers.
Online businesses have access to buyers outside their immediate location, are governed by different rules than physical locations, and often run with less overhead. Taxing the goods sold brings the two types of businesses closer to being even competition, some say.
“This is definitely not healthy for the local retailer,” Ornce said. “This is just one way to help [the spirit of] Small Business Saturday go forward.”
Independent pool retailers who support the sales-tax measure and think it could improve their ability to compete do have recourse: their elected representatives.
“As with anything that affects their livelihood, either short term or long term, we think they should take an active stance with their elected officials,” Sterling said. “If they’ve got an opinion one way or the other, then express it.”
Across the Internet, small-business owners from every industry are calling for the measure to be voted on and passed, referencing the need for a level playing field. The National Retail Federation, the lobbying organization for the retail industry, supports the effort.
“The introduction of this legislation is a welcome sign that lawmakers may finally act on this retail industry priority, and builds upon ongoing activity in the House and Senate,” said David French, NRF senior vice president for government relations, in a statement when the senators recently introduced the measure.
“It is Congress’ responsibility to lay out a legislative framework on online sales tax collection, and we hope that the introduction of this bill will spur congressional action to remedy this problem this year.”