Chattanooga area small business owners want online sales tax loopholes closed

Chattanooga area small business owners want online sales tax loopholes closed

July 19th, 2013 by Mike Pare in Business Around the Region

Tom Glenn, owner of some local Ace Hardware businesses, and others speak about online sales taxes and marketplace fairness Thursday afternoon during a news conference at the Tennessee Speed Shop in East Ridge.

Photo by John Rawlston /Times Free Press.

Online sales tax losses

By the numbers

* 1.5 million - Estimated number of jobs that would be added nationwide over the next decade by requiring online retailers to collect local and state sales taxes comparable with what brick-and-mortar retailers pay.

* $563.2 billion - Amount of extra economic growth (Gross domestic product) over 10 years by taxing online sales

* $1 million - Proposed exemption for online merchants from collecting sales taxes on small sales.

Chattanooga business owners support online sales tax

Chattanooga area business owners on Thursday endorsed a new study showing that closing the online sales tax loophole could lower overall tax rates and jump-start economic growth.

Donnie Eatherly, president of the East Ridge auto parts dealer P&E Distributors, said exempting online retailers from sales taxes puts brick-and-mortar retailers who must still collect such taxes at a signifcant competitive disadvantage.

"We're working with one arm tied behind out back," he said.

A study released Thursday by former Reagan administration economist Arthur Laffer, who now lives in Nashville, said that passing pending federal legislation such as the Marketplace Fairness Act would have a myriad of benefits.

The study said the legislation, which passed the U.S. Senate this spring, would create a tax system with fewer loopholes, a larger base and lower tax rates for all taxpayers.

Laffer's study estimated that it could lead to an increase of $563.2 billion in gross domestic product and more than 1.5 million jobs over the next 10 years.

Tom Glenn, who owns Ace Hardware stores in the area, said the proposed legislation is not about raising taxes, but rather collecting them. In Tennessee, buyers of online goods are supposed to pay the sales tax on their online purchases but most people rarely do.

At the same time, brick-and-mortar stores must collect the sale taxes on the goods they sell.

"It's almost like local businesses are paying double," Glenn said.

He said passage of the Marketplace Fairness Act could help Tennessee and possibly reduce some of the current taxes people pay.

"It's good business," Glenn said.

Ron Harr, the Chattanooga Area Chamber of Commerce's chief executive, said the current situation is an inequity to some businesses and he supported the legislation.

"This is an entrepreneurial issue," he said.

Hamilton County Commissioner Tim Boyd said online sale levies "is not a new tax. It's an uncollected tax."

"I'm all for it," he said about the bill, which was authored by U.S. Sen. Lamar Alexander, R-Tenn., and co-sponsored by U.S. Sen. Bob Corker, R-Tenn.

However, some argue that the bill could hurt small businesses which will incur the ongoing costs of collecting these taxes in all jurisdictions and that it would be a disincentive to economic growth.

Eatherly said that businesses collecting less than $1 million in revenue are exempt.

He also said computer software will be available for companies provided free by states to enable the businesses to collect the sales taxes.

Eatherly called on U.S. Rep. Chuck Fleischmann, R-Tenn., to call for a vote on the Marketplace Fairness Act and to support the measure to level the playing field among web and traditional retailers.

Under a 1992 Supreme Court ruling (Quill Corp. vs. North Dakota), states and localities currently may collect sales taxes only on retailers with a physical presence in that state. Amazon, the world's largest online retailer which opened distribution warehouses last year in Chattanooga and Charleston, Tenn., has agreed to begin paying sale taxes in Tennessee in 2014.

Contact Mike Pare at or at 757-63118.