The Chattanooga Volkswagen plant is seen in this aerial photograph taken in March 2012.Though Amazon finally agreed to begin collecting Tennessee’s sales taxes in 2014, the company long avoided and aggressively contested that responsibility. So the notices that Amazon has begun sending its Volunteer state customers to remind them of their legal duty to send the sales taxes they owe to the state treasurer will likely come as a surprise to many. The company’s interim step towards a fair tax policy may be wasted motion in too many instances — many purchasers just won’t pay a tax that isn’t collected at the point of purchase — but at least it points in the right direction.
Amazon, eBay, Overstock and other online retailers should always have been required to collect state sales taxes, just as their bricks-and-mortar competitors do. That they escaped that responsibility as they grew into marketplace giants is an anomaly. It was wrongly perpetuated, however, due to a myopic U.S. Supreme Court ruling in 1992 that said tax-collection duties only applied if online companies had a physical presence in their customers’ states. Since most didn’t then, and still don’t, their sales surged on that unfair cost advantage. It can’t be ended soon enough.
The tax-collection disparity is grossly unfair and harmful not just to brick-and-mortar retailers, but also to the communities which depend on local retailers’ physical presence for jobs and state and local commercial tax revenue. Roughly 68 cents of every consumer dollar spent in local retail stores stays in the community and gets cycled through many local hands.
Distant online retailers, by contrast, contribute little if anything to these critical economic factors. Indeed, online purchases generally only send consumer dollars out of their customers’ communities. The harm that does is counted in lost local jobs, reductions in local economic activity, shuttered stores, and declining state and local budgets.
State and local governments and consumers have at last begun to act to stanch the economic loss. Their advocates have built spreading support in Congress for enactment of the proposed Marketplace Fairness Act, which would authorize states to require online vendors to collect state and local sales taxes on purchases in their jurisdictions.