Small business faces unfair competition

By Jan Teague, President/CEO

Washington Retail Association

This past Thursday U.S. Representative Suzan DelBene invited me to meet with her and Kirkland reporters during a small business tour to talk about online retailers not collecting the state’s sales taxes.  I was reminded why our small retailers are having so much trouble competing with out-of-state online retailers who don’t collect taxes on sales.

These small retailers have to buy enough product to stock their shelves.  They pay ahead of time and incur shipping costs.  Once the shelves are stocked, people come in and find what they are looking for and may stand right in the store with their cell phone and shop for the same item online.  Often the item comes right from a warehouse and the customer gets a lower price and doesn’t pay the state’s sales tax.

In one bicycle store, the owner said that he can spend an hour helping a customer with an expensive bike that needs to be fitted to the customer, then the customer goes online and orders the bike. In this digital age the trend is expected to continue.  These small retailers need help with this situation and the Main Street Fairness Act being considered by Congress will help by requiring online retailers to collect sales taxes like traditional retailers do.

I appreciated Representative DelBene working on this issue and it makes perfect sense.  She was Washington State’s Department of Revenue Director prior to her election last fall and now sits on the House Judiciary Committee where the Main Street Fairness bill is expected to be heard.  DelBene has signed on as a sponsor.  It’s great for Washington State to have her in that position because DelBene really understands the issue, particularly the tax revenue losses that the state continues to see because taxes from online sales aren’t getting collected.

State residents are required to pay sales tax on their purchases.  That is how we fund the state’s services that these same residents use.  But there is no way to enforce having online customers send in their tax obligations.  It must come from the online retailer who should collect it when the sale is made.

Representative DelBene pointed out during the tour that the bill now being considered is the first step to getting businesses the competitive relief they need. There is an exemption in the bill that online retailers who do $1 million or less business a year would not have to collect sales tax.  Online retailers argue that it would be too hard to do for a small online retailer who does business in a lot of states.

But DelBene believes that the technology to make it extremely easy is just around the corner.  The burden will melt away.  At that point Congress can take up the exemption threshold and fully level the playing field