Each year, Virginia shoppers seeking back-to-school bargains have an added incentive to make those purchases during the back to school tax-free holiday leading up to the beginning of the school year. This year, it occurred this past weekend, August 1-3.
The bitter irony about that isolated weekend is its status as one of the only times when Virginia brick and mortar merchants, who power the state economy and employ our friends and neighbors, are on competitive even footing with online retailers.
The rest of the year, many online retailers that market their wares to Virginia shoppers have an unfair tax advantage over homegrown merchants. The online-only folks don’t collect and remit state sales tax as traditional shopkeepers are legally required to do.
Ambiguity in the law enables virtual merchants to get away with that if they don’t have a “physical presence” in the state, even if they maintain a warehouse or distribution facility in Virginia.
Action by Congress is needed to level the playing field. That is why a broad coalition of local and state elected leaders and many of Virginia’s most influential business groups are urging federal lawmakers to provide balance through E-Fairness legislation.
The U.S. Senate on a bi-partisan vote last year approved the Marketplace Fairness Act and sent it to the U.S. House of Representatives for consideration. Unfortunately, it has been languishing ever since in the US House Judiciary Committee chaired by Republican Congressman Bob Goodlatte of Virginia. Meanwhile, Virginia merchants continue to plead for basic tax fairness.
Fixing that inequity alone should compel action from elected leaders who know government shouldn’t be in the business of picking winners and losers through policy that selectively benefits some. But if that does not inspire a response, there is something more pressing at hand that should: a widespread tax increase that will be triggered in months if it isn’t averted.
Virginia’s General Assembly in the 2013 transportation funding package banked on receiving significant revenue from online sales tax collections – about $1.5 billion for roads, public education and localities through 2018 – on the belief Congress would pass E-Fairness legislation.
Realizing that is not guaranteed, state legislators inserted a failsafe in the event that does not happen: a 45 percent increase in the state gas tax that kicks in Jan. 1, 2015 if Congress doesn’t act.
That solution has several flaws. A potential gas tax hike will not fully offset lost tax revenue from online sales. Even worse, it punishes every driver who fills up in Virginia just so certain online merchants can maintain the status quo of not collecting and remitting sales tax as most businesses already do.
Does that make sense?
Why should the gas tax skyrocket for everyone, when we know it will fall short of online tax revenue remittance, when the simpler and fairer solution is for Congress to level the playing field? Should ordinary citizens face double taxation so that certain online retailers can continue to escape the basic tax accounting duties that businesses are legally obligated to meet? Individuals are too, in fact.
Did you know that state law already requires individuals to report unpaid sales tax on online purchases when they file income tax reports? Why should online sellers get a pass when businesses and individual taxpayers don’t?
The Virginia Retail Federation is the joint information and advocacy effort of Retail Merchants Association and Retail Alliance.
Ray Mattes is president and CEO of Retail Alliance.
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