Carol Behr thinks she knows why many students at SouthernIllinois University Carbondale are buying their books online, andit’s not just the convenience.
It’s the sales tax savings, says Behr, a vice president ofKennedy Book Store, which owns Southern Illinois Book & Supplyin Carbondale. the company also has a store in Lexington, Ky., andof the two, she says the Carbondale store has lost more business tocompetitors such as Amazon.com.
The difference? Kentucky doesn’t charge sales tax on textbooks,but Illinois does.
To Behr, the slipping Illinois sales figures highlight an unfaircompetitive situation. “A business is a business,” she says. “Whydo I have to charge sales tax and they don’t, if we’re in the samebusiness?”
Ten senators, including Illinois Democrat Richard Durbin andMissouri Republican Roy Blunt, introduced a bill Wednesday thatwould remove Amazon’s competitive advantage over bookstores such asthe one in Carbondale. And, surprisingly, Amazon has endorsed thebill.
The proposed Marketplace Fairness Act would require retailers tocollect taxes on remote sales, including those made online orthrough mail order. It would apply only to businesses with at least$500,000 of remote sales, and only in states that adopt asimplified sales tax structure.
Large sums of money are at stake. William Fox, a professor ofeconomics at the University of Tennessee, estimates that state andlocal governments lose $11.4 billion a year in revenue from onlineretail sales, and a total of $23.6 billion from untaxed online,catalog and business-to-business sales.
In the past, Amazon has fought hard to avoid collecting itsshare of that money. In Illinois, North Carolina and Rhode Island,it canceled relationships with local affiliates to get aroundso-called “Amazon tax” laws. In Texas, it threatened to close awarehouse rather than pay $269 million in sales taxes.
Now, though, Amazon says it ‘strongly supports enactment” of theMarketplace Fairness Act. not all companies agree: eBay, forexample, says the bill “fails to protect small business retailersusing the Internet.”
Past congressional efforts to address the sales tax issue —including an earlier Durbin bill — have gone nowhere, but Amazon’sendorsement could change things. States’ financial straits may lendsome urgency, too.
This could also be framed as a jobs bill. Fox says that anonline retailer such as Amazon hires one worker for each milliondollars in sales, while a big retailer such as Walmart would hirefive people. “The concern is the tax treatment might be sendingpeople to buy online and reducing employment,” he says. Researchseems to confirm Behr’s hunch that taxes affect the competitivebalance between online and bricks-and-mortar retailers. a couple ofstudies, Fox says, have found that people in higher-taxjurisdictions are more likely to shop online.
Opponents emphasize the compliance burden of collecting salestaxes for some 7,500 taxing jurisdictions. That’s not as big anobstacle as it seems, however: the online arms of Target andWalmart already collect taxes in all those places, and the softwarethey use is available to other e-tailers.
This debate, it should be emphasized, is not about raisingtaxes. the taxes are already owed, but states have no realistic wayof collecting them from individual shoppers. As a matter offairness, if Southern Illinois Book & Supply is required to bea tax collector, then Amazon and eBay should be, too.
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