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Brick-and-Mortar Retailers Agitate for Online Sales Taxes

Do online sales need more regulation? Should online businesses follow Amazon’s lead and start collecting sales taxes now? Or would such a change prove disastrous for sellers doing $1 million or more annually in sales?

The Marketplace Fairness Act, a proposed piece of legislation that would require the simplification of state tax laws to facilitate collection of sales taxes by online retailers from their customers, has yet to become law. While a number of states have enacted their own tax collection requirements for ecommerce pros, not all have done so yet.

For states that have yet to require out-of-state online sellers to collect sales taxes, the issue is a contentious one for traditional retailers who believe potential shoppers will opt for a tax-free online purchase instead of a taxed sale at a local business. Although people are required to pay these taxes by their states as part of their annual tax filing, it’s generally believed that most people don’t do so.

The complaints against the lack of such collection in states where brick-and-mortar businesses compete with online sellers who aren’t required to collect outside of their own state manifest across the country. In Michigan, retailers cited in an Mlive reportclaim to have lost sales for years to the likes of online retail giant Amazon as well as other online-only businesses.

A trade group called the Michigan Retailers Association claimed in the report that the state of Michigan loses out on over $400 million per year in uncollected online sales taxes.

In Arizona, a Phoenix small-business owner spoke out against his online competition in an opinion piece at The Republic. Jim Mapstead criticized the “online sales-tax loophole” stemming from the US Supreme Court’s decision in Quill Corp v. North Dakota.

“Opponents of e-fairness also claim this would be a new tax, which is ridiculous,” said Mapstead. “We all know that sales taxes are the law of the land (in 45 states); all we are asking for is that they be applied equitably.”

And in Wisconsin, some old line retailers claim to be victims of “showrooming,” the practice where people come into a physical store to browse but make their ultimate purchase online. A story in the Leader-Telegram cited the frustration of an appliance store owner who’s witnessed potential customers turn to their smartphones to compare prices and departing without buying anything.

“It’s not right. It hurts,” Paul Amundson said in the report. “It’s not fair, and there should be tighter controls on Internet sales.”

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David A Utter
David A Utter
David A. Utter is a freelance writer based in Lexington, KY. He has covered technology topics from search to security to online business and has been quoted in places like ZDNet and BusinessWeek. He considers his appearance on NPR's "All Things Considered" with long-time host Robert Siegel a delightful highlight. You can find him on Twitter @davidautter and on LinkedIn.