While online sales helped carry the retail market this holiday season, the battle between brick-and-mortar stores and online-only retailers over sales tax heated up in Congress.
At issue is the collection of sales tax, which is applied when customers are based in a state in which the retailer has a physical presence.
Many Internet retailers can avoid passing the tax onto their customers, much like catalog sellers have been able to since a 1992 Supreme Court ruling.
“The government shouldn’t make winners and losers based on how you choose to sell,” said Maureen Riehl, government and industry relations counsel and vice president for the Washington-based National Retail Federation.
There are billions of dollars at stake, said Riehl, whose organization advocates that states sign onto a voluntary agreement called the Streamlined Sales and Use Tax Agreement. The SSUTA sets uniform tax standards for the states to use, though each state sets its own sales tax rate. So far, 22 out of the 45 states with sales taxes have joined the SSUTA to some degree.
Earlier this month, a representative from NRF member J.C. Penney Corp. Inc. testified before a House Judiciary subcommittee about a bill that would empower states to actually implement the SSUTA.
The Sales Tax Fairness and Simplification Act would enable SSUTA states to collect sales taxes from remote sellers.
Under the proposal, states would reimburse all businesses for the collection costs, which currently can be as high as 11.47 percent of revenue for small businesses, and 3.09 percent for the average company, Riehl said. The tax would not apply to businesses with less than $5 million in gross remote sales.
Riehl thinks the 23 states not part of the SSUTA might join if the measure passes — though she says implementation is a long way off.
The amount of money states could net is still ambiguous, said Bill McClellan, vice president of government affairs for the Arlington-based Electronic Retailing Association, who doubts collection of sales tax will have a big impact.
An Internet sales tax would also not level “the playing field between big-box retailers and small retailers,” McClellan said. Multi-state retailers have larger staffs, he said, and “relationships in the community” to curry favor with tax policy.
