The honeymoon may be over for online shoppers. The Senate’s oft-maligned Committee on Commerce, Science and Transportation held a recent hearing to discuss a topic that rankles businesses with an ecommerce arm. The title of the hearing was, “Marketplace Fairness: Leveling the Playing Field for Small Businesses.” It was, in essence, a dog and pony show aimed at currying favor with brick-and-mortar storeowners who have seen their customers flock to online marketplaces in droves.
The proposed solution is a tax on all online sales that would be paid to the states at the point of purchase. This last phrase is an important one, for therein lies the Senate committee’s rationale for imposing such an onerous fee on the American people. What they mean when they say “Main Street Fairness” is that state governments can now exert authority over out-of-state retailers, requiring them to collect and pay sales tax on any online purchases made from the original state.
So what does this mean for you, the online consumer?
According to Forrester Research, the typical American online shopper will be spending upwards of $1,700 per year by 2016. The $168 figure comes from taking 9.8% (the average U.S. sales tax) of that 2016 projection. Why 2016? Because that’s the year the proposed Internet sales tax resolution would go into effect.
The senators on the Committee on Commerce, Science and Transportation are just licking their chops at the prospect of telling all those states just how much money the upper chamber plans to pour into state coffers. The committee members are somewhat less enthusiastic about trumpeting the new tax in the faces of shoppers.
Senators specifically involved in promoting this tax resolution are Sen. Dick Durbin (D-IL), Sen. John Rockefeller (D-WV), Sen. Michael Enzi (R-WY) and Sen. Lamar Alexander (R-TN).
Unsurprisingly, the presidents and CEOs of several online retail companies had a few choice words for the proposed legislation. Richard Wagner, the president of Touchboards.com, Power Equipment Direct CEO Jon Hoch and pcRUSH founder and COO Frank Khalili joined with seven other online business leaders to express their dissatisfaction with the Internet sales tax.
But the ire of several ecommerce giants doesn’t paint the entire picture. Small, mom & pop e-tailers described by Amazon.com as the “99%” of the online marketplace, would also lose big if this legislation were to move forward. The only true beneficiaries of “Main Street Fairness” are brick-and-mortar mega-chains like Target, Costco and the nefarious Wal-Mart.
Amazon originally opposed the Internet sales tax, changing their position only once they realized they stood to earn over $1 billion in new revenue by offering a tax collecting service to their online marketplace sellers. This economic reality makes the value of Amazon’s opinion more than a tad suspect.
In addition to Amazon’s representative, Scott Petersen, Steven Bercu and Steve DelBianco addressed the committed on behalf of Streamlined Sales Tax Governing Board, BookPeople and NetChoice respectively. NetChoice is group representing the interests of online consumers and ecommerce businesses. They, understandably, voiced opposition to the tax.
9.8% average? Few tax districts have that tax rate, and I know of none that are higher. I challenge the reporter to verify. True numbers would be closer to 7%.