Congress must restore marketplace fairness
BY BRAD HENRY & MIKE ROUNDS
Saturday, September 22, 2012
9/22/12 at 4:31 AM
The Internet has revolutionized business and how people shop. It will continue to inspire innovation and competition while providing Americans with boundless opportunities. It also brings new challenges, including how to ensure tax parity between Main Street businesses and online retailers.
The United States Supreme Court has ruled that a state cannot require retail companies to collect state sales taxes unless they have a physical presence in that state.
Importantly, consumers still owe the state sales taxes for online purchases. But, unlike a local store, the online retailer does not have to collect the tax and remit it to the state. Instead, the consumer is legally bound to pay the taxes directly to the state, a very difficult requirement for the state to enforce.
This year, Oklahoma will likely lose more than $200 million in uncollected taxes from online purchases.
More important, the jobs of more than 170,000 individuals (more than 10 percent of Oklahoma's work force) who work in local retail stores are at risk. Oklahoma has lost as many as 16,000 jobs due to the loss of state sales tax revenue.
Internet sales have increased by 15.4 percent during the last year, a rate nearly double that of overall retail sales. According to the U.S. Census Bureau, e-commerce has steadily increased as a percentage of overall retail sales from 1.6 percent in the first quarter of 2003 to 4.9 percent in the first quarter of 2012.
Twenty-four states, including Oklahoma and South Dakota, have adopted the Streamlined Sales and Tax Agreement, which makes it easier for retailers who operate in multiple jurisdictions to collect and remit taxes. Other states have individually negotiated with e-retailers to begin collecting the tax.
The Governors' Council of the Bipartisan Policy Center, of which we are both members, recently hosted a public forum at Oklahoma City University to bring attention to this issue. The Governors' Council consists of a bipartisan group of former governors committed to promoting state perspectives at the federal level.
Governors are doing all they can to level the playing field for their small businesses. Their state-by-state initiatives have created a patchwork of tax laws that has resulted in many of the large e-retailers calling for a federal solution.
Congress must act quickly to pass a federal law giving states permission to require online retailers to collect sales taxes. Again, these taxes are already due to the states, and now there is an easy way for online retailers to collect and remit them.
If Congress fails to act, then we invite Oklahoma policymakers to join other states in challenging online retailers to create a fair playing field for local businesses. Fairness and sound tax policy aren't just for the real world - they should apply in the virtual world as well.
Former Oklahoma Gov. Brad Henry and former South Dakota Gov. Mike Rounds are members of the Bipartisan Policy Center's Governors' Council.
Brad Henry and Mike Rounds: Fairness and sound tax policy aren't just for the real world - they should apply in the virtual world as well