Fairness at core of online tax question

Published 11:06 pm Thursday, October 1, 2015

A new tax invariably faces political obstacles, but why should the same be true of a tax that already exists but is not collected? And shouldn’t a tax practice that arbitrarily creates a competitive advantage be corrected?
Such questions are well justified in the stalled debate over collecting sales taxes on online purchases. Although the revenue obviously matters, it’s just as much a question of basic fairness.
Currently, neither a state nor a local government collects sales taxes from online retailers which do not have a physical presence in the state. That reduces revenue legitimately owed, but it also gives the online retailer a price advantage based not on volume or efficiency or any other skillful business practice, but solely on taxation.
The business with a brick-and-mortar presence in Alabama collects and remits sales taxes; the online-only retailer does not. In Montgomery, for example, the total sales tax is 10 percent, meaning that an online retailer can have – for no valid reason – a 10 percent price advantage simply handed to it.
Estimates of the uncollected sales taxes on online purchases in Alabama run as high as $347 million a year. That’s a significant sum in a state where governments at all levels are strapped.
Resolving the problem rests with Congress, which has dodged around the issue for years without enacting the equitable legislation that has been proposed. Alabama’s representatives have not shown much enthusiasm for the proposal, although we are mildly encouraged by recent comments from Rep. Robert Aderholt, the senior member of the House delegation.
In an interview with the Gadsden Times, Aderholt acknowledged a “parity problem between small businesses and online retailers” and noted that “There is no question that there is a large degree of unfairness for a business on the other side of the country to not pay any sales tax even though they are doing business in a particular state like Alabama.”
There certainly isn’t, and that’s the central issue. Of course Alabama and its municipal and county governments could use the revenue, but it is no less important that retailers compete for customers under the same set of rules. If a business can beat another’s prices through its own acumen, so be it, but the price advantage should not be created artificially by an unjust tax provision.

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