Time for an Internet sales tax

Published 9:53 pm Friday, June 30, 2017

By John Carr

Many online retailers are able to avoid collecting sales tax for most states.

That’s great news for shoppers; everyone loves a tax break. But tax breaks should be consistent and not full of exceptions you could drive a thousand delivery trucks through.

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According to the U.S. Small Business Association, most states simply do not require online retailers to collect taxes when they do not have employees or a physical presence in the state where the purchaser lives. Local retailers selling the same products must collect taxes without fail. They have an unfair disadvantage.

Online sales are growing almost three times as fast as brick-and-mortar store sales and should exceed $400 billion in 2017, according to quarterly sales reported by the U.S. Census Bureau. Most estimates suggest that $25 billion in potential sales tax will not be collected.

Local businesses not only collect sales tax, but also pay for local licensing, real estate taxes and various fees and services, along with the comparatively high rent. Without prosperous local businesses, most city budgets would quickly be strained, if not put into cost-cutting crises.

Besides direct payments, local businesses offer indirect benefits, including a couple that may affect your wallet in a way that is far greater than the tax-free deal you get on your next online purchase.

First, local businesses provide employment, and lots of it, almost 16 million U.S. jobs in May 2017, according to the Bureau of Labor Statistics. About 2.5 million of those jobs were management or supervisory. Most are starter jobs and part-time positions.

Millions of workers help their families, pay for school and gain experience needed to further their careers or start their own businesses in just such positions.

Local business success also affects your home’s value. The curb appeal of a vibrant business area helps the whole community grow in value.

There is a simple solution. The prevailing sales tax wherever the purchaser lives should be collected by online retailers and sent back to the state. If residents of that state decide the tax is too high, they should elect officials to address them. Either way, any businesses in direct competition and selling identical products should collect identical taxes.

Then there is the question of how our state’s share of the $25 billion in taxes might be used. Perhaps there could be a grant system to reinvest it in projects to improve the downtowns where those local businesses often struggle. That would nicely bring things full circle.

The smallest percentages accumulate to make the most massive changes. You may hate paying tax when shopping online, but you may love a downtown that benefits from just a slightly less tilted playing field.

John Carr is the publisher of the Suffolk News-Herald. Email him at john.carr@suffolknewsherald.com.