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Internet tax: the whole picture

Frank Beer

By A Contributor

Taxes. Like most folks, I hate paying them. Sales tax is one of the main ways we finance government, right or wrong. As a retailer, I collect those taxes. Now we are debating whether states should be able to collect tax on Internet sales.

Early in the age of the Internet, the federal government decided to take a hands-off approach “so it could be all it could be.” There was uncertainty whether it would be used. But the Internet has transformed almost every-thing we do. One big impact is its effect on how people shop. As more people use the Internet to research and order pro-ducts online, it is remaking retail and forcing retailers to adapt.

I have had to adapt to the mega-mart mania of the 1990s and early 2000s. Al-though that mania provided challenges, we small retailers were able to adapt and in many cases thrive. The mega-marts have lots of stuff and perceived cheap prices all under one roof, but they also have flaws. They can’t offer the level of expertise and personal service that small stores can. So while the mega-marts flour-ished, the small boxes found their niche, and an equilibrium developed.

The Internet offers what the mega-marts have and more — bigger selection right in your own home. And best of all… no sales tax! Fabulous! As folks buy more on the Internet, that leaves less for the brick-and-mortar stores. The mega-marts are smarting, and a few have gone away. Circuit City, Borders and Linen and Things cited Internet competition as a major reason they failed. But the Internet has wrought the most havoc on small retail shops. Their demise may not garner the same attention as the bigger players, but it has been devastating. Maybe this is the price of progress, and those of us in brick-and-mortar stores are dinosaurs.

But here’s the rub. Remember when it was hands-off the Internet so it could “be all it can be?” Well, I think it has arrived. Why do online retailers still get that exemption from collecting sales tax and why has the government picked them as winners? Some say it would be too hard or too costly for Internet retailers to collect taxes. Some say this is a new tax, which it is not. And others will say that the Internet should… well… they should just… We pay enough taxes, darnit!

Congress is debating the Marketplace Fairness Act. It would require any retailer with Internet sales in excess of $1 million a year to collect sales tax for states it ships products to and remit the taxes to a central location. The states would be required to provide the software that minimizes retailers’ costs. We do not have this luxury. So the cost argument has been addressed. It should be noted that a state can choose NOT to participate and exempt its residents.

The $1 million exemption would protect small Internet retailers from having to collect the tax. Much of the rhetoric against the tax centers on this objection. Opponents ignore the exemption. My store does under that per year, and I’m not exempt.

As to it being a new tax, this is a false argument. Most folks don’t know it, but in Kansas and most other states, the tax should legally be reported and paid by the consumer. When was the last time anyone you knew paid this tax? Technically, if you don’t pay it, you break the law. Thank goodness for safety in numbers!

But the most important argu-ment for the Marketplace Fair-ness Act is the middle word — fairness. I live by one rule when it comes to government. When I hear the word “fair,” I normally grab my wallet. But in this case is it fair? The Internet has advantages. Does it really need others granted by government?

Last Christmas more gifts were ordered online than were purchased at brick-and mortar stores. In 2012 an estimated $23 billion in sales tax from purchases on the Internet went uncollected. Some estimates in Kansas put our totals at over $120 million and growing. Next time you see how much has to be cut from the state budget, keep that in mind.

At the Manhattan Area Chamber of Commerce, we support the Marketplace Fair-ness Act. You will find bipartisan support from groups as diverse as the Kansas Chamber of Commerce and American Conservative Union to the AFL-CIO and Govs. Jerry Brown from California to Bobby Jindal of Louisiana. I want to thank Sen. Jerry Moran for his support in the Senate and hope our Kansas representatives will look at the total picture and join in support of this act.

It is understandable why the Internet was initially granted this exemption. But if we were to discover that we had made a mistake with our kids, would we not correct it? We may not be able to fix it going backwards, but we should certainly fix it going forward.

Frank Beer, who owns Manhattan’s Radio Shack, is board chair of the Manhattan Area Chamber of Commerce.

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