Laird: Time to Close Tax Loophole

Posted November 8, 2011 at 4:51pm

Janie Lorber and Humberto Sanchez’s recent piece (“Web Sales Tax Fight Heats Up,” Nov. 2) reveals a number of common misconceptions about the online sales tax issue. It’s time to cut through the old rhetoric that may have worked in 1992 or when the Internet was just getting started as a retailing platform.

The current sales tax system, put in place by a decades-old Supreme Court decision (Quill Corp. v. North Dakota), has created an artificial disruption in the retail marketplace that prevents local retailers from getting a fair chance to compete against online-only counterparts.

Plus, most consumers don’t even realize they are responsible for paying the sales tax on their Internet purchases when they shop from online retailers that don’t collect the tax — that’s true in 45 states.

The article cites opponents who claim that efforts to close the online sales tax loophole would place an “unfair burden” on remote retailers. Yet, that burden already exists for local retailers. Every day, brick-and-mortar retailers of all sizes are collecting and remitting the appropriate tax — all the while operating at a significant competitive disadvantage to online and catalog retailers. With online sales outpacing traditional brick-and-mortar sales 4-to-1, community retailers, national retailers and the shopping centers that have them as tenants are calling on Congress to act.

The International Council of Shopping Centers is encouraged that some Members are attempting to find a solution. It is important to note that none of the bills introduced or contemplated thus far create a new tax.

Rather, these bills reflect what should be the reality of the 21st-century marketplace: a level playing field where all retailers can thrive on equal footing. Once Congress authorizes the sales tax collection, states can reap the benefit of collecting taxes already owed.

Non-sales tax states such as New Hampshire and Oregon have a choice whether to charge a sales tax to their own residents. It seems reasonable that when a retailer from a non-sales tax state decides to sell over the Internet to expand its customer base, the retailer is bound to play by the rules of the state where the consumer resides. The ICSC believes a sale is a sale, and the government should no longer play favorites.

Brick-and-mortar retailers of all sizes have joined in the effort to create a viable and fair framework for sales tax collection. It’s time that Congress took action to help states and our communities across the country by closing the $23 billion sales tax loophole.

— Betsy Laird, senior staff vice president, Office of Global Public Policy, International Council of Shopping Centers