Tom Glenn owns and operates Ace Hardware stores in Chattanooga.
Local retailers are an incredibly important part of our Chattanooga community. We create jobs. We support schools, ball clubs, our churches and synagogues, and our United Way. We enjoy being involved in our communities and being able to give back.
And we collect and pay our share of taxes — property taxes, business license taxes, and sales taxes. Most of our online-only competitors pay none of these taxes. And yet, not only are there no consequences for this lack of local support, ironically there’s a huge benefit — being able to sell goods more attractively to consumers by selling them without charging sales tax.
Congress is considering a bill that would give Tennessee small businesses a level playing field on which to compete with giant Internet retailers. It passed the Senate by a large, bipartisan margin, but the House may be a different story. We’re hopeful that our Tennessee congressional delegation and especially Congressman Chuck Fleischmann will stand up and see that this plan makes it to the President’s desk.
The bill is the Marketplace Fairness Act. It seeks to correct a 20-year old loophole in the tax code that gives online retailers a free pass on collecting sales taxes. Because of a Supreme Court ruling made long before the Internet really caught on, our current tax policies do not give states like Tennessee the ability to enforce their own sales tax laws in any meaningful way. Consumers who make online purchases still owe the tax but it’s rarely paid and there’s no practical means for collection.
Local Tennessee businesses, however, are required to collect and remit sales tax on every transaction and to incur the administrative costs to do so. And, obviously, the fact that Tennessee retailers have to tack sales tax onto their prices when the online-only sellers don’t puts our local businesses at a disadvantage-and the local jobs they support at risk.
Main Street businesses and their employees are not the only ones hurt by a bad situation in which the government is effectively picking winners and losers and subsidizing online retailers at the expense of local businesses. Tennessee communities lose millions and millions of dollars every year. And Tennessee law requires that at least half of the local sales tax component of these funds would have gone to our schools so this public policy arguably penalizes our children’s future. Since 2007, more than $1.8 billion has gone uncollected in Tennessee. To fill that gap Tennessee has had to look to other taxes and fees to raise its revenues.
Tennessee Gov. Bill Haslam supports the Marketplace Fairness Act, as does our Senate delegation. Sen. Bob Corker voted in favor of the bill and Sen. Lamar Alexander was one of its key sponsors.
But House supporters of the MFA face a tough battle. While Amazon is a supporter, California-based, internet behemoth eBay does not want this bill to become law and is lobbying hard to in essence influence our tax policy here in Tennessee.
Anti-tax crusaders have wrongly portrayed the MFA as a new tax on Internet consumers. But it’s not a new tax. It merely permits the collection of an existing tax. And by passing the MFA, we effectively put tax policy back in the hands of our state legislature.
No one wants to impose new taxes on consumers, least of all retailers operating in tough economic times. But by collecting sales tax on Internet sales in addition to the broader base of retail sales, our state legislature could more effectively manage the sales tax rate to target the total sales tax revenue needed — which could logically result in a decrease in the rate.
Regardless of that decision, the ultimate accountability for our state’s tax laws should rightfully rest with our own state legislature and not be restricted by our federal tax code.
Furthermore, supporters of the Marketplace Fairness Act believe that everyone should be treated the same by our tax code; that consumers should pay the same tax regardless of where they choose to shop; and that businesses should play by the same rules regardless of whether they sell online or on Main Street.
Rep. Chuck Fleischmann has a real opportunity to support the myriad of local retail businesses across his district. I strongly urge him to stand up for those retailers and for a common sense tax policy and vote for the Marketplace Fairness Act. We believe it rightfully puts the responsibility for the future of Tennessee and our communities in the hands of Tennesseans.