No taxation without representation. It’s a phrase that originated over 250 years ago based on grievances by American colonials who were paying taxes to England, even though they had no physical presence there. I mention this not to give a history lesson, but because the existing tax laws for ecommerce businesses are about to receive a colonial style reversal–so to speak.
Up to this point enterprise ecommerce has been able to take refuge behind a 1967 Supreme Court ruling, upheld again in 1992, that prevents states from collecting sales tax on retailers that do not have a physical presence within their borders. But it seems as though that’s about to change.
US Senator Dick Durbin of Illinois is working on a piece of legislation that would permanently implement state sales tax on all ecommerce purchases from retailers big and small. Under the new proposal, which is slated to emerge within days, Durbin and other lawmakers will apparently seek to put an end to the “unfair advantage” that ecommerce has enjoyed over brick and mortar stores. It was only a matter of time.
“Why should out-of-state companies that sell their products online have an unfair advantage over Main Street bricks-and-mortar businesses?” Durbin was quoted as saying in a recent speech.
In an effort to try and simplify the roughly 7,500 tax jurisdictions, lawmakers have already created the Streamlined Sales Tax Agreement, which aims to ease complications and simplify existing tax laws. It’s also likely to help pass this new piece of legislation, and 24 states are already on board to support the changes.
Despite the name of the new tax bill, the Main Street Fairness Act, it seems hard to believe this law has anything to do with protecting or preserving businesses like my favorite bookstore on Main Street in Salt Lake City that has been operating for over 80 years. Saying that agendas are created to look out for the ‘underprivileged’ has no doubt turned into a political propaganda cliché.
Are enterprise ecommerce sites capturing some of the business that brick and mortar stores would have had otherwise? Without a doubt. But if you are a brick and mortar store and don’t have an online presence by now, well, I might assume that business is either great for you without having a website, or you aren’t looking to gain a competitive advantage. Either way, it’s probably the ease and convenience of online shopping that prompts someone to make an ecommerce purchase, and not because they may have to pay a few extra dollars in a store for something that’s pretty standard on most purchases in all but a few states.
Ecommerce has never been about grinding down the little guy, that’s a strategy that some businesses choose to adopt on their own, and it has nothing to do with operating online or in a physical location. Consider a few large brands that started as brick and mortar that now operate an exceptional web business in addition to successful retail locations. Think JC Penny, think REI, think Target. These are not disadvantaged franchises that get left behind as the business landscape evolved. Most businesses that want to stay competitive have to move forward with technology and innovation, not because they want to or because it will make things fair, but because it’s a requirement.
Like most people, I don’t ever see myself complaining about paying fewer taxes, and as an online consumer I have always been happy when that extra line didn’t show up on my checkout page. But honestly, it was just a matter of time before someone kicked down the door–and I guess I’m ok with it because I’ve been expecting it for some time now.
But is Durbin’s bill really about competitive advantage and leveling the playing field or is a guise for something larger, like saving states with record budget deficits? These days it’s hard to identify fact from fiction. But unlike the taxation disputes of the mid 18th century, don’t expect these changes to spark the next American Revolution.
Jared Matkin is a staff writer for HotWax Media with a background in PR, Branding and Marketing. He’s also a light-hearted and an opinionated character who will join other HotWax Media employees and advisers in periodically posting his thoughts on topics ranging from enterprise eCommerce to business and technology.