Seven independent trade groups joined together this week to call for the equitable collection of sales tax on online purchases. In a letter to each of the governors in the 45 states that collect sales tax, the organizations urged states to enforce existing tax laws by requiring out-of-state online businesses with nexus in their states to collect sales tax.
"There is power in numbers, and for a group of organizations representing independent businesses to band together in this way is unprecedented," said ABA COO Oren Teicher. "It clearly points to how serious the online sales tax issue is for locally owned businesses across the country. Lost revenue from uncollected sales tax isn't confined to just one or two states, it affects every state where sales tax is collected. Hopefully, the governors in those states will acknowledge the gravity of this issue and take the lead in enforcing existing sales tax laws."
The letter to the governors grew out of a meeting of independent trade organizations on November 29 and 30 in Washington, D.C. The letter's signatories -- the American Booksellers Association, American Specialty Toy Retailing Association, Coalition of Independent Music Stores, Independent Florist Association, Independent Office Products & Furniture Dealers Association, North American Retail Dealers Association, and the National Bicycle Dealers Association -- were among those who met at the "Independent Trades Summit" to discuss common goals and challenges specific to independent retailers and businesses. Key among their concerns was states' equitable enforcement of existing sales tax laws.
In their letter to the governors, the groups wrote: "As the shopping season progresses and Internet shopping continues to grow in popularity, it is no surprise that, increasingly, we read of the many states that are reporting looming budget deficits, a result, in part, from uncollected sales tax from Internet sales."
The organizations pointed to statistics demonstrating just how some states are losing tax revenue to both online retailers and commercial resellers. "Florida estimates that it is losing more than $2 billion annually from untaxed Internet sales, according to the St. Petersburg Times; Connecticut is seeking to make up $520 million it believes it is losing in tax revenue, the Stamford Advocate recently reported; and Michigan officials estimated in 2006 that Internet purchases might be costing the state in the neighborhood of $600 million annually in unpaid sales tax. In addition, New York State and California are grappling with the issue of budget shortfalls due in part to an inequitable enforcement of sales tax collection for online sales," they wrote.
ABA is also asking booksellers in the 45 states that charge sales tax to urge their governors to equitably enforce existing tax laws. To make this endeavor easier, the association has prepared a template letter that can be adapted and sent. The letter emphasizes that booksellers are not calling for new Internet taxes, but, rather, the enforcement of tax laws already in place.
Letter From Seven Independent Trade Groups to the Governors of 45 States Collecting Sales Tax
On behalf of the thousands of our member businesses in the state, we the undersigned are calling on you to equitably enforce existing tax laws by requiring out-of-state retailers and commercial resellers with nexus in your state to collect sales tax. As the shopping season progresses and Internet shopping continues to grow in popularity, it is no surprise that, increasingly, we read of the many states that are reporting looming budget deficits, a result, in part, from uncollected sales tax from Internet sales.
It is the same story here -- by favoring out-of-state online retailers and commercial resellers over our own in-state businesses, we are letting millions of dollars in sales tax revenue go uncollected. We are calling on you to take the lead in this matter by enforcing existing sales tax laws.
The numbers could not be clearer: States are losing tax revenue to huge online retailers and commercial resellers, many of who have nexus in states due to affiliate relationships. For example, Florida estimates that it is losing more than $2 billion annually from untaxed Internet sales, according to the St. Petersburg Times; Connecticut is seeking to make up $520 million it believes it is losing in tax revenue, the Stamford Advocate recently reported; and Michigan officials estimated in 2006 that Internet purchases might be costing the state in the neighborhood of $600 million annually in unpaid sales tax. In addition, New York State and California are grappling with the issue of budget shortfalls due in part to an inequitable enforcement of sales tax collection for online sales.
It's equally clear that, left as is, as online shopping grows, so will the sales tax shortfall. This inequity is only compounded during the holiday season, as our member businesses have to compete against such online retailers as Amazon.com that can entice holiday shoppers with tax-free shopping. In contrast to the challenges that bricks-and-mortar retailers and commercial resellers are grappling with this holiday season (including escalating gas prices and a weakening economy), a report recently predicted that online holiday sales would increase by some 18.5 percent this season. In the report, Jeffrey Grau, a senior analyst for eMarketer, an online market research company, noted that this is "far superior to the low, single-digit growth rate forecast for the overall retail industry this holiday season."
Currently, online customers are told they are getting a deal because they don't have to pay tax, and some states actually declare that they are helping consumers by not enforcing these laws. In truth, the reality is that when states allow out-of-state businesses to pirate away dollars that normally would have been spent in-state, they are doing nothing less than helping to encumber their state's own economy. In the end, the state's citizens end up the big losers. Uncollected sales tax revenue translates into a funding shortfall for such essential services as schools and first responders.
We are asking you to step up to the plate and defend the state's businesses. Locally owned independent businesses are the backbone of our economy. Every analysis makes clear that locally owned businesses -- particularly retailers and commercial resellers -- have far greater economic impact on their communities, contribute more to local charities, and are largely responsible for our villages, towns, and cities retaining their unique characteristics. To undercut them -- by selectively deciding what laws to enforce and what laws to ignore -- is simply outrageous.
Importantly, we are not discussing any new "Internet taxes." We are simply urging the state taxing authorities to enforce the tax laws already in place. Online retailers and commercial resellers that have an indisputable presence in your state -- whether it's through a sales rep, a bricks-and-mortar store, or an affiliate relationship -- are no different than any other business within your state. When any business, or any online business that has a physical counterpart within the state, makes a sale to a customer within the state, it is required by law to collect sales tax.
As trade groups with thousands of members in the state, we are not asking for special treatment. However, we want the state to enforce the laws uniformly and fairly. We urge you to immediately take concrete steps to end this discriminatory enforcement of existing law and require online retailers and commercial resellers -- whether they operate online or via affiliates -- to start to fulfill their obligation to collect sales taxes.
Thank you for your consideration.
Avin Mark Domnitz, CEO
American Booksellers Association
200 White Plains Road
Tarrytown, NY 10591
Kathleen McHugh, CAE
American Specialty Toy Retailing Association
116 W. Illinois St., Suite 5E
Chicago, IL 60610
Don VanCleave, Store Owner
Coalition of Independent Music Stores
3738 4th Terrace N.
Birmingham, AL 35222
Tom Carlson, Director
Independent Florist Association
1634 E. Racine St.
Janesville, WI 53545-4281
Chris Bates, President
Independent Office Products & Furniture Dealers Association
301 N. Fairfax Street, Suite 200
Alexandria, VA 22314
Tom Drake, President
North American Retail Dealers Association
4700 W. Lake Ave.
Glenview, IL 60025
Fred Clements, Executive Director
National Bicycle Dealers Association
777 W. 19th St. Suite O
Costa Mesa, CA 92627