Op/Ed Published in Virginia Pilot June 15, 2014
Co-authored by Virginia Retail Federation representatives, Ray Mattes, President/CEO of Retail Alliance and Nancy Thomas, President/CEO of Retail Merchants Association.
Some have proposed a revenue collection system requiring online shoppers to pay taxes to the state and locality where the product is housed, not where the shopper is physically making the purchase. That effectively makes us all taxpayers for each of the 45 states with a sales tax.
Online retailers continue to exploit an outdated legal loophole to forgo collecting and remitting state and local sales taxes. This puts local businesses at a competitive disadvantage in the marketplace, robbing local communities of economic growth, jobs and civic engagement.
Imagine you are a consumer: You are looking to buy a new TV, and you do some research, both online and in stores. What you’ll see is that the same TVs online seem less expensive than those in the store. That’s because sales tax is added when you purchase from a local retailer, but the same does not hold true for all online retailers.
Consumers, understandably, are more often going for what they believe to be cheaper prices, especially for big-ticket items like TVs and other appliances.
This situation is stifling local business growth and threatening small businesses nationwide. While public opinion continues to move in favor of equity through sales tax collection, some in Congress continue to fight against sound policy based on simple fairness, good economics and common decency.
Among the various roadblocks in the way of tax fairness is the “origin-based sourcing” alternative for revenue collection. Origin sourcing would require online shoppers to pay taxes to the state and locality where the product is housed rather than where the shopper is physically making the purchase. That effectively makes us all taxpayers for each of the 45 states that have sales taxes on the books.
This would, of course, make a mockery of the concept of “no taxation without representation”
— buyers would have no representation in the government to whom they are paying sales tax. Do Virginians really want to pay for schools in California, police in New York and garbage collection in Washington? This would essentially mean tax increases for Virginians, as we would be required to pay other states’ considerably higher sales taxes for items purchased online.
Furthermore, origin sourcing would create de facto tax shelters in the five states that currently do not levy sales taxes, with online retailers setting up shop in such states to maintain their competitive advantage. In short, it would not only do nothing to close the online sales-tax loophole, but it would actually create a new set of loopholes for online retail giants to exploit.
Thankfully, on this issue Congress is showing good sense: a recent House Judiciary Committee hearing on the tax fairness topic showed that most committee members believe origin sourcing is a bad idea. This is important as the committee — chaired by Virginia’s own U.S. Rep. Bob Goodlatte — is currently considering legislation to level the sales-tax playing field. Goodlatte should quickly and decisively stop the origin-sourcing conversation and move to pass a tax fairness bill.
E-fairness legislation is a top priority for Virginia’s businesses — and its passage should be a priority for our delegation, and all of Congress, as well.