In Our View: Level the Field for Retailers

Congress should help states collect sales taxes on Internet purchases



The Marketplace Equity Act currently before the U.S. House would allow the 45 states with state sales taxes (including Washington) to require online retailers that sell more than $500,000 a year to collect sales taxes, regardless where those e-commerce retailers are based.The first question that occurs to most folks: Is this a new tax?

Republicans are often eager to help Americans define new taxes or tax increases. Let’s ask them. Speaking on July 24 before the House Judiciary Committee, Republican Gov. Bill Haslam of Tennessee said: “This discussion isn’t about raising taxes or adding new taxes.” He was speaking on behalf of the National Governors Association. “This is about states having the flexibility and authority to collect taxes that are already owed by their own in-state residents,” Haslam added.

Another Republican, Sen. Mike Enzi of Wyoming, wrote in a recent op-ed for “Let’s clear up one thing: this is not a new tax. The Marketplace Fairness Act is not about new taxes. … We are talking about an existing state tax that purchasers already owe. And it is a tax on all sales, not on the Internet itself.”

Enzi carries a certain partiality into this discussion. He happens to be the author of the Marketplace Equity Act. But according to a recent Associated Press story, other Republican governors including Chris Christie of New Jersey and Terry Branstad of Iowa support making out-of-state online merchants charge and collect taxes.

The governors’ stance is easy to explain. States are losing massive amounts of federal funding and having a devil of a time dealing with the losses. Here in Washington alone, as we pointed out in an editorial last year, the Marketplace Equity Act would add an estimated $483 million during 2013-2015. Broken down, that would be $306.5 million for the state and $176.5 million for local governments.

Nationwide in 2012, states are expected to lose more than $23 billion in uncollected sales taxes on Internet purchases.

Who else could we ask for advice on this subject? Perhaps online merchants. They ought to be the strongest opponents of a sales tax on Internet purchases. To the contrary, Seattle-based Inc. supports the act, and when a similar bill was introduced in the Legislature a few years ago, it was supported by Wal-Mart, J.C. Penney and the National Retail Federation. Here, too, the support is easy to explain. Online sales are going through the roof, to such an extent that the equitable and overdue collection of sales taxes would have a negligible impact. E-commerce sales soared by more than 16 percent at the retail level between 2009 and 2011. Census Bureau statistics show $169 billion in online sales in 2010, and the Forrester Research company reports that about 25 million new online shoppers will appear nationwide in the next four years.

In addition to state and local governments, one group that stands to gain the most in this issue includes countless brick-and-mortar businesses that are struggling to keep up with online competitors who often wield the unfair advantage of waiving sales taxes. More than 21 states have enacted various requirements for collecting sales taxes on Internet purchases, but help is needed from Congress. Unlike many other bills that carry titles with laughable euphemisms or unabashed hyperbole, the Marketplace Equity Act is properly named. That’s why it’s supported by many politicians in both parties. It’s time to level the playing field.