Main Street businesses are the backbone of the economy, and it's time for Congress to develop a backbone and pass bipartisan tax fairness legislation to protect those businesses, says the South Dakota Retailers Association.
South Dakota would stand to gain close to $40 million in sales tax revenue if federal lawmakers approve the Marketplace Fairness Act introduced on Nov. 9. Co-sponsored by South Dakota Sen. Tim Johnson, the measure would end special treatment for online-only retailers, and create a true free market by leveling the playing field for all retailers.
SDRA Executive Director Shawn Lyons says passage of the plan is way overdue.
"We applaud Senator Johnson for backing this legislation, which in turn means he has the back of our Main Street merchants," said Lyons. "Unfortunately, over the years too many members of Congress have been unwilling to stand up to the giant internet conglomerates. The result is that those huge corporations have been able to avoid collecting and remitting tax that is rightfully owed on internet purchases. That means they have an unfair advantage over local businesses, and it also means the state doesn't get tens of millions of dollars in revenue that it deserves and needs."
Online sellers are already required to collect sales tax from customers in their own states, but congressional action is needed because of a 1992 U.S. Supreme Court ruling. The court ruled in Quill v. North Dakota that retailers are required to collect sales tax from out-of-state customers only if they have a physical presence such as a store, warehouse or office in the customer's state. The court held that the 45 state and 7,600 local sales tax systems across the nation were too complicated for a retailer to otherwise know how much tax to collect.
This is the third major sales tax measure introduced or reintroduced this year. All would make it easier for states to require out-of-state sellers to collect the appropriate tax on internet purchases.
The National Retail Federation (NRF) supports passage of the tax fairness legislation.
"Over the last 20 years the retail industry has changed dramatically, but unfortunately our antiquated regime for sales tax collection has not kept up," NRF President and CEO Matthew Shay said. "In a 21st century retail industry, we ought to have a 21st century system to ensure uniform collection of sales tax. A modern approach to this issue would provide states with additional revenue in order to protect jobs that are badly needed to support American families and keep our communities economically healthy. And it's not just about retail – fair sales tax laws are needed so budget cuts don't force layoffs for essential workers like police, firefighters and schoolteachers."
The Retail Industry Leaders Association says the legislation would end the special treatment afforded online retailers like Amazon.com that allows them to forgo collection of state sales tax.
"A true free market is devoid of government preferences and special treatment," said Katherine Lugar, executive vice president for public affairs at the Retail Industry Leaders Association. "The Marketplace Fairness Act will get government out of the way, restore the free market and close the loophole that has given an unfair advantage to online retailers like Amazon.com for over a decade."
SDRA's Shawn Lyons agrees.
"This legislation doesn't impose a new tax. It simply enforces a tax that's already in place and is already owed but is going unenforced due to Congress failing to act," says Lyons. "We hope South Dakota Sen. John Thune and Congresswoman Kristi Noem will join Sen. Johnson in supporting this plan. It's good for our small town merchants, and it's good for South Dakota."