Following up on a letter that 30 New York State booksellers sent to Governor Eliot Spitzer urging him to require online retailers with affiliates in the state to collect sales tax, the American Booksellers Association is asking booksellers in the other 44 states that charge sales tax to urge their governors to equitably enforce existing tax laws. To help booksellers in this crucial endeavor, ABA has prepared a template letter (below) 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.
"As the holiday season progresses, and the media focuses on the ramifications of decreases in sales tax collection, it is a pivotal time for us to raise our voices again in a call for e-fairness," said ABA COO Oren Teicher. "It is important to bring this issue up when it's in the media spotlight and on the minds of state budget directors, many of whom are dealing with budget shortfalls. The governors of the 45 states that collect sales tax have to deal with this issue. As online shopping grows in popularity each year, the sales tax shortfall will only grow if the problem is not addressed."
Among recent news reports regarding states suffering huge losses in sales tax revenue, the St. Petersburg Times said that Florida has projected a $2 billion loss annually from uncollected tax on Internet sales, and such states as Connecticut and Michigan have also made similar projections.
ABA is urging booksellers to contact their states' governors. Below is the letter that booksellers can adapt and send. A list of the addresses and telephone and fax numbers of each governor's office is available on www.nga.org.
To have the greatest impact, booksellers should mail a hardcopy of the letter on store letterhead to their governor's office. ABA is also asking booksellers to fax a copy of their letter to BTW Senior Editor David Grogan, at (914) 591-2720, or via e-mail to email@example.com. --David Grogan
Dear Governor [NAME]:
As an independent retailer in the state of [STATE NAME], I am calling on you to equitably enforce existing tax laws by requiring out-of-state retailers with nexus in our state to collect sales tax. As the shopping season progresses, there has been a growing number of published reports in the media regarding how a number of states are seeing huge losses in tax revenue resulting from Internet sales. Sadly, we are no different -- by favoring out-of-state online retailers over [STATE NAME]-based businesses, we are allowing millions of dollars in tax revenue to go uncollected. I am calling on you to take the lead in this matter by enforcing our existing sales tax laws.
The numbers could not be clearer in this matter: States are losing tax revenue to online retailers, many of whom have nexus in the 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 a budget shortfall due, in part, to Internet sales.
What's also very clear is that this situation is not going to get better if it's left unaddressed. As online shopping grows, so will the tax shortfall.
This inequity is only compounded during the holiday season, as businesses like mine have to compete against online retailers -- such as Amazon.com -- that can entice holiday shoppers with tax-free shopping. In contrast to the challenges that bricks-and-mortar retailers are grappling with this holiday season (including escalating gas prices and a weakening economy), a report recently predicted that online holiday sales will increase by some 18.5 percent this season for online retailers. 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."
Customers believe they are getting a deal because they don't have to pay tax, and some states actually proudly declare that they are helping consumers by not enforcing these laws during the holidays. But here's the reality: When states like ours allow out-of-state businesses to unfairly usurp dollars that normally would have been spent in-state, they are doing nothing less than helping to encumber their state's own economy.
When such out-of-state online retailers as Amazon.com -- that clearly have nexus in the state through their many [STATE NAME]-based affiliations -- skirt tax laws, [STATE NAME]-based businesses will lose sales as shoppers inevitably take advantage of tax-free shopping. In the end, [STATE NAME]'s citizens are also losers, as potential tax revenue from both sources is uncollected -- monies that fund such essential services as schools and first-responders.
I am asking you to step up to the plate and defend our state's homegrown businesses. Locally owned independent businesses are the backbone of our economy. Every analysis makes clear that locally owned businesses -- particularly retailers -- 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." I am simply urging the state taxing authorities to enforce the tax laws already in place. Online retailers that have an indisputable presence in our 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 our state. When any business, or any online business that has a physical counterpart within the state, makes a sale to a customer within that state, it is required by law to collect sales tax. That's why the many independent retailers in our state that have e-commerce sites follow sales tax laws by collecting sales tax on online orders purchased in-state. Large out-of-state retailers with nexus in the state should do the same.
As a retailer and business in this state, I am not asking for special treatment. However, I do want my state government to enforce the laws uniformly and fairly. I am urging you to immediately take concrete steps to end this discriminatory enforcement of existing law and require online retailers -- whether they operate online or via affiliates -- to start to fulfill their obligation to collect sales taxes.
Thank you for your consideration.
[NAME, STORE NAME & ADDRESS]