The U.S. Senate is on the
right track requiring Internet retailers to collect sales taxes at the time of purchase for the goods and services they sell.
The current law that requires collection of sales taxes only where companies maintain a facility gives an unfair advantage to the Internet sellers over the bricks-and-mortar, traditional retailers who pay sales taxes at the time of the purchase.
In Ohio alone, a study conducted by the University of Cincinnati estimates the state loses approximately $200 million annually because most of the Internet sellers are out of state. The same study indicates thousands of retail jobs are disappearing because the bricks-and-mortar retailers cannot compete.
The law, called the Main Street Fairness Act, would require all online retailers with gross out-of-state sales exceeding $1 million to collect sales taxes imposed by the destination taxing jurisdiction.
Compliance would be expensive, with upwards of 9,600 taxing jurisdictions in the country among the 45 states with sales taxes. The tax rates, as well as the scope of goods taxed, also vary widely. Nevertheless, under the legislation states would have to provide software with the appropriate tax rates.
The House is expected to oppose the Main Street Fairness Act, saying it is to onerous for the Internet start-up retailer because it puts on retailers the burden of incorporating the information and actually collecting the tax. Opponents argue that resources that go toward compliance might no longer available for expansion and innovation.
Their argument ignores the unfair burden they are placing on the small, tradition retailer. The fact that the tax does not kick in until sales exceed $1 million gives some protection to the start-up Internet retailer.
Amazon, on track to become the biggest retailer in the United States, has changed course and now supports the Main Street Fairness Act. Cynics say that's because Amazon is so successful it needs to place distribution centers in nearly every state, which would force it to collect state sales taxes in those states. We cannot argue with that, but the unfair edge given the Internet vendors over the bricks-and- mortar retailers is too much and should be eliminated.
The Main Street Fairness Act is good because it levels the playing ground in retailing.