News & Trends

Common sense says to adopt the Marketplace Fairness Act

Posted by: Dave Henry Dave Henry
on May 16, 2013

One vote down, one to go. The Marketplace Fairness Act is finally moving through Congress, with the U.S. Senate passing the bill on May 6th by 69-27. The act would give states the authority to collect sales tax from online retailers — just as they do with brick-and-mortar retailers — to at last level the playing field between the two sellers.

But while the news is a big win for brick-and-mortar retailers, our advocacy is not done. Kimco has been a vocal supporter of the Marketplace Fairness Act, and we urge the House to follow suit and quickly pass the bill so President Obama, who has announced his support, can sign it into law. It’s a common-sense bill that’s been long overdue.

A sale is a sale, no matter where it takes place. While brick-and-mortar retailers are required to collect anywhere from 6 to 10 percent state sales tax, online retailers are not, as set forth by the 1992 Quill Corporation v. North Dakota ruling. As a result, online retailers can sell the same products at lower prices, giving them a competitive gain over brick-and-mortar retailers.

Some Marketplace Fairness Act opponents have claimed the bill will be too costly and time-consuming for small retailers to handle, because they will have to manage states’ varying tax structures. However, to address this, the bill doesn’t apply to businesses that sell less than $1 million a year online. The bill also requires states to create a central authority for tax collection and provide businesses with free software to help them calculate taxes.

Yet some critics say this $1 million threshold is too low, contending that the bill will mainly benefit large national retailers. But here’s what they’re missing. Small, mom-and-pop shops have been devastated by e-commerce. You can see it in the occupancy data of all retail REITs. Our vacancies are much higher in the small shop spaces, and that is a direct result of e-commerce competition.

I can’t tell you how many small businesses have been impacted by showrooming, where customers come into stores to browse and try on merchandise, but then walk out the door with nothing but a serial number. They search for and buy the item online, because they won’t have to pay sales tax. In other cases, customers don’t even bother to step foot inside a brick-and-mortar retailer, and instead go straight online to shop because they know they’ll save the tax.

Consider a mom-and-pop jeweler, for instance. A customer walks in to price an engagement ring, but then buys the same ring online to avoid paying sales tax. The jeweler is losing thousands of dollars on the sale and the state is missing out on hundreds of dollars of sales tax revenue on that one purchase alone.

When you add up situations like these, you can see that states missed out on some $23 billion in uncollected sales tax revenue, according to National Conference of State Legislators estimations. That’s revenue that can support a number of state-funded programs and initiatives — education, research, technology — to drive economic growth.

Remember this is not a new tax. Consumers are obligated to pay sales tax on their Internet and catalog purchases by declaring them on their annual tax returns. But many consumers don’t realize this or neglect to do it. The Marketplace Fairness Act simply transfers the onus to states, which are the obvious authority to take the lead on sales tax collection.

The Marketplace Fairness Act couldn’t have a better name. But it could be moving more swiftly into becoming law. Urge your representatives to support the bill. Share this post with your friends, family, and contacts to spread the word. Put a sign in your storefront that says you support the Marketplace Fairness Act. Let’s adopt the Marketplace Fairness Act.

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