Consumers may like the ability to shop online and avoid paying state and local sales taxes, and many online retailers may like the competitive advantage the arrangement provides them over “bricks and mortar” businesses across the country, but U.S. Sen. Dick Durbin, D-Ill. says the situation has a significant price.
“It’s really not fair to say to that store down the block that’s paying rent and paying property taxes and collecting sales tax (that) we’re going to put them at a disadvantage to their Internet counterparts.”
Durbin called on Congress to take up the Marketplace Fairness Act, something he’s been supporting for years. It would give state and local governments the ability to require online retailers to collect and remit sales taxes for online purchases to the places where the purchases were made.
Durbin says several online retailers, including Amazon, support the proposal.
Durbin says local merchants are becoming “showrooms” as consumers visit local stores and shopping malls to research products and then go home to make their purchases online. He says by not collecting sales taxes, online retailers enjoy a 5 to 10 percent advantage in price.
Reports indicate that for this most recent Thanksgiving holiday shopping weekend local stores and shopping malls across American “had flat sales compared to last year,” but Durbin says online retailers saw a 30 percent increase from the same weekend last year.
While not all of those sales were necessarily due to a shoppers’ ability to avoid sales taxes, Durbin says losing taxes leaves state and local officials with few options. “Unlike the federal government, states and localities can’t run deficits” to pay for necessary services such as police and fire protection and other community services. “The only option they have is to raise other taxes, like property taxes or to cut vital services.”
In addition to collecting sales taxes, Durbin says local retailers also provide jobs in their communities. In his floor comments, he explained how one sports store in the suburbs of Chicago is seeing more and more individuals come in to look at merchandise, ask questions and even take pictures of those items, only to leave the store and buy those goods online. He says another sports store a few towns away, closed its doors two years ago, after seeing its sales fall to online retailers. Durbin says that while nothing can be done for those who have gone out of business, Congress can level the playing field for those store owners still in business.
In comments on the Senate floor Tuesday, Durbin expressed frustration that the House Judiciary Committee hasn’t taken up a version of the Marketplace Fairness Act. Instead, he says Republican lawmakers included language in an unrelated bill that keeps state and local governments from imposing taxes on such things as access to the Internet. Durbin also opposes taxing access to the Internet, but he says the language was “air dropped” into a conference report on customs and trade issues, without the provision having been debated in either chamber.
Durbin says the two measures should be combined to provide a long-term solution to a growing problem. In recent years, Durbin says Congress has cut federal funding to state and local governments to help put federal spending on a proper footing, but he says the combined effect of blocking states from imposing certain taxes while at the same time not allowing them to collect taxes already owed is a “one, two punch” that he says will cost states hundreds of millions of dollars.
The Marketplace Fairness Act passed the Senate in the previous Congress when Senate Democrats were in the majority, but the measure has failed to get out of the House Judiciary Committee in this Congress.
Durbin told St. Louis Public Radio that he hopes to see the bill given a hearing early next year.