Both the senate bill and companion legislation pending in the U.S. House of Representatives have attracted Democrat and Republican sponsors, and are supported by a strange-bedfellows coalition that includes retail groups, small-business owners, Wal-Mart and — somewhat surprisingly — Amazon, which would rather see a federal solution than a patchwork of state collection procedures.
But another coalition led by NetChoice, a Washington, D.C., group of trade association and e-commerce sites including eBay and Facebook, disagrees, saying that lawmakers “have created a poison pill for the Internet, consumers, and – worst of all – the very small businesses the bill seeks to help,” according to NetChoice Executive Director Steve DelBianco.
John Marshall, owner of Grismer Tire — which has a location in Springfield on West Columbia Street — isn’t buying it. Earlier this year, Marshall was named to the Ohio Main Street Leadership Council that is designed “to represent small businesses across the state in their effort to remedy the online sales tax disparity,” the council said.
Marshall, whose 24 retail stores are spread across central and southwest Ohio, said by allowing some online retailers to avoid collecting sales taxes, “the government is picking winners and losers.”
Some of his customers order tires online, then come to Grismer and ask for the tires to be installed on their vehicle, Marshall said. Those tires have gotten more expensive in recent years as larger, wider tires became more popular, and as the price of rubber and petroleum rose.
“Why should one company enjoy a 7 percent competitive advantage over a company that is inside the state, employing the people of that state, and providing services and paying income taxes and workers comp taxes in the state?” Marshall said.
Local jewelry store owner Steve Sahle said his business, Rolfe’s Jewelers on West Columbia Street, hasn’t seen the same kind of drop in business as other jewelers because of the custom work Rolfe’s does.
“We’ve had people who have gone online to look at diamonds, and then they’ll come in and want to know if we’ll match the price,” he said.
Sahle also said he has seen a drop in business in the sale of anniversary gifts and colored stone items, however, the gold buying business and silver sales have helped balance out business.
Owner of Main Street Comics and Games Scott Riley said customers come in all the time asking for a price seen online to be matched in the store.
“My response is my price is my price; the Internet doesn’t have rent to pay,” Riley said.
Making people pay sales tax online may bring them back into stores, but Riley said the problem of losing business to the Internet could have more weight if prices were closer to what is offered in stores.
“It’s a really frustrating thing to deal with when they can sometimes pirate the books for free where we’re paying to have hard copies here on the shelves that we can’t sell,” he said.
Local buyers of online goods are supposed to keep track of online sales and record the totals on state income tax forms. But less than 1 percent of Ohio taxpayers do that, even though more than 60 percent of filers purchase items online, according to a 2010 survey. A University of Cincinnati study projected that the failure to collect sales tax from all online retailers cost Ohio more than $200 million in 2011, according to the Alliance for Main Street Fairness.
The Dayton Area Chamber of Commerce, which has launched a “Buy Local” campaign, favors the legislation, believing it will encourage Miami Valley residents to spend their money at neighborhood stores, according to Chris Kershner, the chamber’s vice president of public policy and economic development.
“When you have local Dayton-area stores that work hard to put up bricks-and-mortar facilities and have competitive retail prices, and an online firm doesn’t have to charge sales tax, that’s not a fair marketplace,” Kershner said.
NetChoice’s DelBianco told a congressional committee last week that the argument that remote sellers have an unfair advantage just doesn’t hold up.
“Paying sales tax for thousands of jurisdictions in 46 states in far more expensive and complex than paying sales tax for a single jurisdiction on over-the-counter purchases,” DelBianco said.
Tod Cohen, eBay’s vice president for government relations and deputy general counsel, told InternetRetailer.com, “It does not make sense to expand Internet sales tax burdens on small businesses at a time when we want entrepreneurs to create jobs and economic activity.”
But the political winds may be shifting on the issue. Two weeks ago, the Wall Street Journal published a story under a headline of “Tax Break Nears End For Online Shoppers” about key Republican governors, including New Jersey Gov. Chris Christie, dropping their longtime opposition to imposing sales taxes on online purchases.
This week’s hearing featured testimony from several senators about the unfair playing field that the lack of online sales tax in some states creates for brick and mortar businesses.
A spokeswoman for Senator Sherrod Brown said the senator is currently reviewing the legislation while seeking input from Ohio consumers and retailers. Senator Rob Portman’s office did not respond to a request for comment by Thursday afternoon.
Rob Nichols, spokesman for Ohio Gov. John Kasich, said Tuesday that the governor has not taken a position on the federal legislation. “We’re following (the issue) closely,” Nichols said.
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