The American Booksellers Association is calling on booksellers in the 45 states that charge sales tax to write to their governors now to urge that online retailers with in-state affiliates be required to collect sales tax in accordance with existing 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.
"Though we know full well that this is the busiest season for our members, it is also the time of year when budget shortfalls are on the minds of state budget directors and tax administrators," said ABA COO Oren Teicher. "That makes this the best possible time to contact state governors about the inequitable collection of online sales tax. We hope booksellers will spare time to adapt and send the letter we've provided."
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 notify BTW Senior Editor David Grogan, via e-mail to email@example.com, when they have sent the letter to their governor. This will help ABA compile information to support its sales tax lobbying efforts.
A number of booksellers have already written to their governors. Vicky Uminowicz at Titcomb's Bookshop in East Sandwich, Massachusetts, who wrote to Massachusetts Governor Deval Patrick on November 30, told BTW that she was pleased ABA is taking action on this issue. "States are losing out on the taxes that they should be collecting on online sales," she said. "It's not fair that out-of-state online retailers are not collecting sales tax.... So many people are buying online these days, so states are missing out on much needed tax revenue."
Brad Jones of BookSmart in Morgan Hill, California, wrote Governor Arnold Schwarzenegger on November 29. "We're subsidizing Internet businesses at the expense of local independent businesses and the local community," he said. "It's irresponsible, and I think our governor has more sense that that. I am surprised he would allow this -- California is losing millions of dollars to Internet retailers through a tax loophole. It's time to bring taxes back home."
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]