There was a time early on in the Internet revolution when it made sense to give fledgling online retailers a break – and they got a big one: Unlike their brick-and-mortar competitors, they didn’t have to collect sales taxes on their sales in most cases.
A 1992 Supreme Court ruling found that companies without a “substantial nexus” – that is, a physical presence – in a specific state didn’t have to pay taxes on purchases made there.
But as online retailing grew into a $200 billion business and as online retailers began to chase brick-and-mortar competitors out of business, any rationale for that break disappeared.
And what we’re left with is a simple question of fairness: If society is going to have sales taxes, everyone should pay them.
We favor a bipartisan bill the Senate is considering called the Marketplace Fairness Act, and we’re glad to see that some Republican governors are supporting the idea, too.
It’s a rather large chunk of change we’re talking about: The Washington Post reported recently that $23 billion in revenue could be raised by the states if online retailers were required to charge the same amount of sales tax as their brick-and-mortar counterparts. For states, including Wisconsin, that are short of cash as a result of a continuing sluggish economy, that’s real money.
That’s one big reason that even some Republican governors are joining the chorus to collect the taxes. New Jersey Gov. Chris Christie was one of the latest to reach an agreement under which Amazon would collect sales taxes on online purchases made in his state. Christie has endorsed the federal bill.
Amazon.com also has endorsed it.
The Wall Street Journal reports one reason is the online retailer is planning to offer same-day delivery in some areas, meaning more warehouses and thus more exposure to collecting the tax because it would have a physical presence in those states.
Understandably, brick-and-mortar stores are tired of what they call the “showroom” effect, in which customers drop in to look at a product, then buy it online so they can avoid the sales tax.
“You’ve been doing all of the work, and then the online competitor steals the sale,” David French, senior vice president of government relations at the National Retail Federation, a trade group, told the Post.
“It gets down to a basic issue . . . of simple fairness for small businesses that create jobs and opportunities all across America. And with the sales taxes they collect, they provide for local police and firemen, for the sewers and streets,” Sen. Dick Durbin, D-Ill., a co-sponsor of the bill, told the Journal.
And Republican Sen. Lamar Alexander of Tennessee said: “The handwriting is on the wall that states will collect sales taxes on online purchases. This is going to happen — if not this year, then definitely by next year.”
It should. It’s only fair for both brick-and-mortar competitors and for state and local governments trying to make ends meet.
Milwaukee Journal Sentinel