An agreement sealed by former Gov. Phil Bredesen relieved Amazon.com of the duty to collect Tennessee’s state and local taxes on sales to Tennesseans. Thrust into that situation, Gov. Bill Haslam has been patient and conciliatory toward Amazon’s resistance to a late-coming legislative effort to force it to collect those sales taxes anyway. But Haslam has at least acknowledged that Tennessee, and other states, need a national fix for the problem of Internet retailers that unfairly refuse to collect and remit states’ sales taxes.
Haslam’s shift is a step in the right direction. He built on it, moreover, when he said last week that he is willing to lead an effort among America’s governors to promote passage of a pending bill before Congress that would offer a national solution to the problem.
The bill is known as the “Streamlined Sales and Use Tax Agreement.” It essentially proposes a compromise with Internet retailers that would require them to collect and remit standardized state and local sales taxes for all the states that sign on to fixed rates, even if they differ from the varying rates that individual states and local governments already impose.
This should be a no-brainer for all sides. It would mitigate some of the inequitable advantage that Internet retailers unfairly enjoy over local brick-and-mortar retailers, which have to pay other state and local property taxes as well as collect sales taxes.
The embedded costs for local stores are obviously higher than those for Internet retailers. The sales tax is just one more burden they have to bear to serve a customer base that is increasingly able and willing to turn to their lower-cost Internet competitors. The streamlined sales tax would help even the competitive playing field, but it would not level it. Regardless, any progress would be welcome.
Problem is, that solution has been on Congress’ backburner for nearly a dozen years, mainly because senators and congressmen admittedly receive no benefit from intervening in a matter that is mainly a state and local issue. It doesn’t help that in the interim, national Internet retailers have built an effective lobbying army and begun pumping campaign donations to Congress to combat the measure. It won’t be easy to overcome their lobby power and persuade Congress to adopt a streamlined sales tax.
However formidable, it’s a challenge worth pursuing. Haslam pointed out in a meeting with reporter Richard Locker, of the Commercial Appeal in Memphis, for instance, that Tennessee is already losing $300 million to $500 million annually in sales tax revenue that is not being collected by Internet retailers on sales to Tennesseans.
That figure can only grow as tech-savvy consumers with new smart phones widen the use of apps that let them scan bar codes on items of all sorts and immediately download price comparisons and potentially better deals, both in other brick-and-mortar stores and through on-line retailers.
Waiting patiently on equity, and a seemingly immovable Congress, is simply not a good option for states, nor for brick-and-mortar retailers. It’s to every state’s and community’s advantage to treat their brick-and-mortar businesses fairly to prevent an Internet-based cannibalization of commerce — and an ensuing raft of empty big-box stores (and smaller ones, too) that have gone out of business and are no longer paying property taxes and providing jobs and shopper convenience.
If Haslam is volunteering to lead the charge to make Internet retailers collect sales tax, he had better get started. Local retailers and tax-needy communities will be watching anxiously to see if he makes good on his promise
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