This week, seven independent trade groups, including the American Booksellers Association, followed up with officials from the 14 states that responded to, or acknowledged, the groups' letter from December calling for the equitable enforcement of sales tax laws. Thus far, states responding to the groups' initial letter are California, Hawaii, Indiana, Iowa, Kansas, Louisiana, Maine, New York, Ohio, Tennessee, Washington, West Virginia, Washington, and Wyoming. The trade groups also sent a second letter to the governors in the remaining 31 states with sales tax that had not yet responded to the groups' initial letter.
ABA continues to urge booksellers in the remaining 31 states to write their governors to call for the equitable enforcement of existing sales tax laws. Booksellers who have already sent a letter are being urged to do it again. To help in this important outreach, ABA has prepared a template letter that booksellers can adapt and send.
"Out-of-state retailers should not be able to entice shoppers with tax-free shopping by skirting existing tax laws," said ABA COO Oren Teicher. "Online retailers and commercial resellers that have an indisputable presence in the state -- whether it's through a sales rep, a bricks-and-mortar store, or an affiliate relationship -- must be required to collect and remit sales tax. We need to let the governors know how important this issue is for their state's business owners. As such, we are asking ABA members to write letters to their governors so that state officials understand the urgency of this issue for business owners in their state."
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 David Grogan, ABA public policy liaison, at (914) 591-2720, or to send it via e-mail to email@example.com.
Following up on our letter of December 14, we the undersigned, writing on behalf of the thousands of our member businesses in the state, are again calling on you to enforce existing tax laws by requiring out-of-state retailers and commercial resellers with nexus in your state, such as Amazon.com, to collect sales tax. Now that the holiday season has ended, we hope that you can make this very serious issue -- which affects everything from state budgets to funding for schools and first-responders to property taxes -- a priority for your administration.
As you undoubtedly know, many states are reporting looming budget deficits, in part, due to uncollected sales tax from Internet sales. Online sales are growing at a remarkable rate, and if large out-of-state retailers and commercial resellers are allowed to continue to skirt the state's tax laws the state's budget deficit will grow right along with it. 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.
More and more media reports are documenting how states are losing tax revenue to huge online retailers and commercial resellers, many of who have nexus in states due to affiliate relationships:
- Wisconsin's state Revenue Secretary Roger Ervin told state legislators that the state will not collect about $150 million a year in taxes due to e-commerce transactions, according to the Milwaukee Journal Sentinel;
- 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 reported;
- Michigan officials estimated in 2006 that Internet purchases might be costing the state in the neighborhood of $600 million annually in unpaid sales tax; and
- 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.
As online shopping grows, so will the sales tax shortfall. The Wall Street Journal recently reported that online holiday sales increased by 19 percent this season. In contrast, retail sales grew by only 3.6 percent, according to Reuters.
Compounding the issue, 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. 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 helping to encumber their own state's economy. In the end, the state's citizens end up the big losers. Uncollected sales tax revenue exacerbates a critical 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