Hometown commercial districts are important and worth preserving.
BELOIT HAS SPENT the past two decades trying to prove something, namely, that a vibrant and healthy city center commercial district is crucial to the well-being of a community.
Not for some.
As Congress debates a bill called the Marketplace Fairness Act — intended to mandate collection of state sales taxes for online sales of merchandise — the outcome remains in considerable doubt. The measure passed the Senate earlier this week. It is expected to experience much tougher sledding in the House of Representatives.
THE CONCEPT IS SIMPLE. When a mom-and-pop store in downtown Beloit or along any Main Street USA makes a hard-earned sale, the store must collect applicable sales taxes in most states (a handful do not have a state sales tax). Likewise, if a big national retailer — think Wal-mart or Target — sells an item via online catalog, it must collect sales tax for the buyer’s state because the big box store has a physical presence all across America.
But if a buyer purchases an item from an online retailer without any physical presence in the buyer’s state, no sales tax is collected. Such big online operators often have a physical facility in just one or two states, so most transactions are tax-free.
One can argue that’s a good thing for the consumer. The buyer saves whatever percentage is customarily assessed in his state.
But is it fair? Is it right?
NOT FOR YOUR friends and neighbors who are trying to run shops in your community. They get hit by a double-whammy.
First, they start out in the hole trying to price an item competitively when they must collect a sales tax of 5, 6 or 7%.
Then they factor in the overhead of maintaining a building, paying for utilities, providing customer service in the local market and other associated business costs.
Before you know it the local store operator is no longer competitive with online purveyors. Look around. In most communities there’s an abundance of empty storefronts. Even in larger cities, along what once were densely-packed commercial strips, more and more empty buildings are evident.
Question: Do communities lose something valuable when shops close and local commercial districts deteriorate?
In our view, that’s a resounding “yes.” We suspect most residents feel the same way.
SO WHO IS against leveling the playing field for retail sales?
For one, the online businesses who benefit from tax-free situations. That’s understandable. No business is eager to give up any advantage.
The anti-tax cranks predictably call this a tax increase. That’s baloney. Before the advent of the digital marketplace buyers typically went to the store for such purchases, and paid the tax. The online marketplace has become a tax avoidance zone. This proposal restores tax compliance.
The anti-regulation crowd complains that it would impose an accounting burden for online businesses. Yes, it will. Same as for any other business already collecting sales taxes.
We’re for balancing the marketplace to give hometown shops a better chance at success. A side benefit of collecting lost revenues will be a little more money to go around in state budgets — for schools, for services, for roads. The House should follow the Senate’s lead and pass this.