It’s Small Business Saturday, and I figured this subject was appropriate. For years I’ve been closely involved with retail sales at a local level. I’ve struggled with the thought of Internet retailers selling the same products or services online for a lower cost. But – even putting aside the constitutional argument – I do not support a sales tax for out-of-state online purchases.
As a retailer you compete against other retail stores and Internet shops on price, quality and service. When it comes to price, I know majority of customers are willing to pay more to either support a local store, to receive better service or for convenience. I am one of those shoppers, and quite honestly paying the local or state sales tax – 6.35% in Connecticut – is only a minor consideration when it comes to a purchase.
We are, after all, responsible for paying the Use Tax on products we purchase out-of-state are we not?
Update: Scroll down for information on the US Constitution’s Export Taxation Clause.
The most important factors for me is to be able to find what I need easily, and the ability to get good advice from knowledgable people. Could it be possible many businesses are pointing to the sales tax they must collect as a crutch because they do not want to stock a wider variety or are unwilling to become product encyclopedias?
Local retailers need to do their market homework, stock appropriately and invest in self and staff training. Sorry, being able to correctly provide change won’t cut it, sales people need to know how to sell and know the products they are selling.
A question for local retailers. If the online sales tax is implemented and people continue to buy products online, what will you complain about next?
Retailers and retail advocacy groups are attempting to use the enormous online consumption of “Cyber Monday”, the Monday after Thanksgiving when many online shops offer deep discounts to consumers, to bolster their argument.
Alison Joseph, a spokeswoman for the Alliance for Main Street Fairness, said:
This should be the last holiday shopping season that Main Street businesses have to compete on a playing field that is not level. Cyber Monday is just another opportunity for out-of-state, online-only retailers to exploit a government-sanctioned loophole that puts local businesses at a significant disadvantage over brick-and-mortar retailers,” she added. …
Let’s deconstruct the above. First make note of the name of the special interest group – Main Street Fairness. I’m sorry, the world is not fair and you can’t make it fair through legislation. Suck it up.
Next, let’s take the sales tax completely off the table and discuss wholesale quantity discount on products. Micro small businesses are going to have a tough time competing with regional grocery stores simply because vendors give quantity discounts. Is it fair the Nilla Wafer people provide a lower price on their delicious wafer-style cookies – that I crunch up and use as a base for my cheesecake – if you buy 1,000 boxes?
I could come up with at least a dozen more examples on why smaller businesses are at a competitive price disadvantage. Could you imagine the legislation possibilities?
Of course like any sweeping legislation that makes complete sense … we have the exemptions.
Sens. Dick Durbin (D-IL), Mike Enzi (R-WY) and Lamar Alexander (R-TN) have authored the Marketplace Fairness Act, which would empower states to collect taxes on online purchases. Businesses that earn less than $500,000 annually in out-of-state sales would be exempted.
There’s that word fairness again. Why exactly are they exempting businesses that earn less than a half million? Are they somehow not a threat to local businesses who have to collect sales tax? I assume the reasoning here would be the outrageous cost to implement the law for Internet retailers.
Can you imagine having to manage the collection of hundreds of different sales taxes and ensuring the correct dollar amounts get to the right jurisdictions? How absurd would it be to be an Internet retailer who sold one item to a Colorado resident for $9.95 and having to send the state 29 cents?
Small businesses must do a lot of things to ensure success and there are endless ways they can fail. Remember, you’re not competing on price alone, which provides you an opportunity to blow us all away with the quality of your product and the service you provide.
As an update, I’d like to reference Article 1, Section 9, Clause 5 of the United States Constitution.
No Tax or Duty shall be laid on Articles exported from any State.
From the Heritage Guide to the Constitution.
Although the original purpose of the Export Taxation Clause was to prevent sectional favoritism by Congress, the Court has chosen to enforce the flat ban that the Framers placed into the Constitution’s text, rather than seeking to measure an export tax’s discriminatory effect. Under the Commerce Clause, Congress retains the power to regulate exports, even to the extent of creating embargoes. It may not, however, utilize export taxes as a means of regulation.
It seems clear the Constitution would need to be amended to allow for states to collect taxes on purchases made online from out-of-state retailers. That said, I also want to make the point the push here is not really to make things “fair” for local businesses competing with out-of-state Internet retailers, it’s to get more tax revenue.