The controversy over Amazon's avoidance of Tennessee's sales taxes won't go away -- and shouldn't.
In the past week, Gov. Bill Haslam has twice stirred the pot, saying first that he wants "a new relationship" with Amazon, and the next day that he wants the Internet retail giant to voluntarily collect state sales taxes on sales to Tennesseans sometime after it opens its three distribution centers in Tennessee.
Then one of the owners of Chattanooga's biggest shopping mall, Hamilton Place, criticized the "uneven playing field" that gives Internet retailers an unfair advantage over brick-and-mortar stores. Sen. Bob Corker followed with an opinion that Congress would ultimately pass a national sales tax regime for all Internet retailers and states, which is, of course, the most fair and logical resolution of the issue.
There's ample reason for this rising concern. It's rooted partly in the states' substantial sales tax losses -- an estimated $410 million annually in Tennessee in uncollected state sales taxes of 7 percent to Internet sales, plus local option sales taxes of up to 2.75 percent.
The more daunting reason, however, lies in the rapid advance of mobile price comparisons that is turning brick-and-mortar stores into what Corker calls "places where people look at the product ... and see if it works for them, and then they go to the Internet and actually buy the product without sales taxes."
"Obviously that's unfair," he asserted.
It's not just unfair. It will cause the downfall of a number of stores in a much shorter time frame than the "three to four years" in which Corker believes Congress may adopt a national compact requiring Internet retailers to pay state sales taxes.
The comparison shopping Corker referenced is already undermining brick-and-mortar stores. This is serious. These stores pay not just state and local sales taxes, but also local property and business taxes, which help support schools and public services. They also pay employees whose jobs (and taxes) are increasingly threatened by the rapid emergence of in-store comparison shopping that culminates in sales lost to online competitors that don't bear the overhead costs of what Republicans could aptly label "retail job-creators."
Amazon, in fact, launched an iPhone app last fall that facilitates such price comparisons. The app lets putative shoppers visit stores and use their phone to take a picture or scan the bar code of a product and use it to check Amazon's price. As a report on online newsletter Mobile Commerce Daily put it, all customers have to do then is click on purchase and Amazon will deliver it free to their doorstep two days later, without charge of the sales tax.
A more insidious irony is that online sites of brick-and-mortar retailers, such as target.com, do have to collect states' sales taxes. In fact, Amazon, which on one hand complains about the logistical complexity of collecting an individual jurisdiction's state and local sales taxes, already handles such diverse tax collections for the brick-and-mortar retailers that it serves. Indeed, the logistical problems with collecting and remitting state and local sales taxes vanished a few years with software codes for state tax schedules for every single ZIP code.
Compliance with sales tax collections and remittance is not now a problem of mechanics; that's a keystroke. Avoidance is simply a competitive advantage that online retailers, though now mature, are determined to keep as long as they can. Yet the longer they feed off that advantage, the more they imperil the business viability and jobs of their brick-and-mortar competitors, and the local and state tax revenue and economic synergy that these retailers generate for the cities and states in which they are located.
If legislators in Tennessee and other states, and their representatives, can't see the threat of this uneven playing field to many of their retail businesses and the communities they enrich, they need only look to what's happened to car dealers, bookstores, clothing, appliance and newspaper industries, among many others, whose economic base has been hammered by the rapidly advancing and supposedly free Internet age.
Of the 44 states with sales taxes, Tennessee relies most heavily on this form of taxation to support state government. Tennessee and other states can't afford to wait three or four years for the long-stalled, national "streamlined" sales tax agreement that Corker believes is on the horizon in Congress. The issue merits more urgency. But without a state sales tax fix in the interim, more and more retail stores will go belly-up, taking away their jobs and the local tax contributions to government with them.