Cyber Monday is behind us, and the results are in: American shoppers spent a record amount on online purchases — $1.74 billion, or 18 percent more than they did last year on the same day. And that figure doesn’t even include purchases made on mobile devices.
But look at it another way: That’s money not being spent at local stores, and much of it is going to online retailers that do not have to collect state sales tax from buyers. Only e-merchants with a physical presence in a state have to collect that state’s sales tax. Although consumers are supposed to pay the taxes directly to the state, hardly anyone does.
States like Washington, which do not have a state income tax, are particularly hard hit by the loss of sales tax revenue to online sales. That funding is badly needed for roads, parks, public safety, education and infrastructure.
Nationwide, states will lose about $23 billion this year because of uncollected taxes on online purchases. And they’re not the only ones hurt: The brick-and-mortar stores that employ people in the community are at a competitive disadvantage because they do have to charge a sales tax. Shoppers often use their stores as showrooms to view items before going online to buy them — and avoid the sales tax.
That might be starting to change, though. On Monday, the U.S. Supreme Court let stand an appeals court ruling upholding a New York law requiring online sellers like Amazon.com to collect the sales tax even if they have no physical presence in that state.
That ruling could spur more states to go after online sales tax revenue by passing laws similar to New York’s. But that would create a hodgepodge of rules and rates for e-merchants. The better solution is for Congress to address the problem at the national level — something Amazon has urged. It already collects the sales tax in the states, including Washington, where it has facilities such as warehouses and distribution centers.
The Senate passed the Marketplace Fairness Act in May, which would allow states to collect sales and use taxes from e-merchants with at least $1 million in annual sales in those states. But the House, true to form, has failed to act.
By declining to hear the New York case, the Supreme Court essentially tossed the ball into Congress’ lap, and it has already stated that a national solution is needed. The House is hurting local businesses, communities and states by failing to create a level playing field for brick-and-mortar and online retailers. It should pass the Marketplace Fairness Act — before Cyber Monday rolls around again.