Be Fair To Main Street: Lift Online Sales Tax Exemption
Grossman
Having run a family business for 36 years, I understand the importance of competition in the marketplace. Competition sharpens the responsiveness of a business and ultimately delivers a better product for the customer. But to be truly effective, this competition must also be fair.
Currently, Massachusetts cannot collect sales taxes from many out-of-state companies that sell to our residents via the Internet. Large online retailers like Amazon and Overstock.com prosper from this tax-free environment while brick-and-mortar businesses in our downtowns and business districts suffer from a competitive disadvantage. This tax exemption was created years ago in part to prop up the new concept of shopping online, an incentive that's clearly no longer needed.
With the percentage of sales conducted on the Internet increasing dramatically, more local jobs and small businesses have become vulnerable. There are more than 500,000 retail jobs in Massachusetts alone, and they're threatened by this lack of a level playing field.
This is also a revenue issue at a time when states are facing financial shortfalls. While people are already legally required to pay taxes on Internet sales when they file their income taxes, very few pay because of the complexity of tracking these purchases or a lack of familiarity with the law. In fact, the Massachusetts Department of Revenue estimates conservatively that about $200 million per year would be raised if taxes could be collected on Internet sales, and the Massachusetts Main Street Fairness Coalition commissioned a study that projected even higher revenue: $387 million in 2011.
Earlier this month, The Marketplace Fairness Act, which allows states to collect taxes on Internet-based sales, passed the U.S. Senate by a vote of 69 to 27. Almost half of the Republicans in the Senate voted in favor of the legislation, making it a rare example of bipartisanship at a time when gridlock and partisan posturing rule on Capitol Hill.
But this bipartisanship may be threatened in the U.S. House of Representatives. Even though many Republicans in that body support the legislation, it could be impeded by Speaker John Boehner, who recently indicated he would “probably not” support its passage. The speaker vaguely claimed that he believed implementing the legislation would be too complicated for e-businesses, ignoring both the fact that it only applies to merchants with more than $1 million in annual sales as well as the free compliance software that qualifying merchants would receive.
Defeating this truly bipartisan measure behind closed doors or through parliamentary procedure is a disservice to the American people, which is why I wrote to Speaker Boehner and challenged him to a public debate on the issue. This is a matter of fairness and equity to Main Street businesses, and I hope the speaker agrees that the public would benefit from a greater understanding of what's at stake here for the small businesses that form the backbone of our economy.
It is contrary to sound public policy to penalize brick-and-mortar stores that employ people here in Massachusetts with a tax system that favors online, out-of-state sales giants. I would not have wanted to be at such a disadvantage when I ran our family business — and neither would other business owners.
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Steven Grossman is treasurer and receiver general of the Commonwealth of Massachusetts.
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