At issue is whether Internet retailers like Amazon.com, Inc. should have to collect state and local sales taxes. Illinois’ own “Amazon Tax” took effect in March 2011, but some Springfield businesses say Internet retailers based in other states still cut into their bottom lines because the state can only enforce the law against companies with a physical presence in Illinois.
These local businesses are joining with the Greater Springfield Chamber of Commerce and the Illinois Retail Merchants Association to push for a national Amazon Tax that would require online merchants across the country to collect sales taxes.
Zach Hoffman, vice president of Wiley Office Furniture, 301 E. Laurel St., says his business usually offers products at prices similar to or lower than those of online retailers. The state’s sales tax adds an extra $50 to $100 in cost for each piece of furniture, he says. Because online retailers based outside of Illinois currently don’t have to collect the state’s sales tax, they have an unfair advantage, Hoffman says.
“If that is a larger purchase, a business-to-business purchase with 5 or 10 or 20 items, now you’re getting into multi-hundred or multi-thousand-dollar differences based on sales tax,” Hoffman said.
Rob Karr, senior vice president of the Illinois Retail Merchants Association, says all online purchases are subject to sales tax. If an online retailer doesn’t charge the tax, the customer is ultimately responsible for paying the tax to the state. Almost no online customers actually do that, Karr says, and forcing consumers to comply would be a nightmare.
A pair of bills being debated before Congress would force online retailers to collect each state’s sales tax. U.S. Sen. Dick Durbin, D-Ill., co-sponsors S.1832, the Marketplace Fairness Act, in the U.S. Senate, while U.S. Rep. John Conyers, D-Mich., sponsors H. R. 2701 in the U.S. House. Both bills were previously known as the Main Street Fairness Act.
“In 2012, states across the country, including Illinois, are expected to lose as much as $24 billion in uncollected state and local taxes on Internet and catalogue sales,” Durbin said in a press release. “From 2005 to 2010 the state of Illinois estimated it lost $153 million each year. The Main Street Fairness Act doesn’t ask anyone to pay a single penny more in taxes. Instead, it would help governors and mayors collect taxes that are already owed.”
Jim Murphy, president of Shoppers Rule Inc., in Arnold, Mo., says a national Amazon Tax would primarily hurt small Internet businesses like his. He says 87 percent of online sales are dominated by “big-box” companies like Amazon, Walmart and Target. Except for Amazon, most of those large companies have a physical presence in every state, Murphy says, so they already collect sales taxes.
Murphy says small companies like his would have to learn the intricacies of every state’s sales tax laws or else hire a tax compliance company at an estimated cost of $2,000 per month.
“For a small business, $24,000 a year is a lot of money,” he said. “That’s someone’s job. Someone is going to lose a job because of that cost.”
Karr says small businesses have nothing to worry about. He points out that both bills under consideration in Washington, D.C., offer an exemption for small businesses whose sales figures fall below a certain threshold. The Senate’s bill puts the threshold at $500,000, while the House would set the threshold at $1 million.
Matt Lamsargis, owner of the Springfield Running Center, says he supports the idea of a national Amazon Tax because he wants “a level playing field.
“I don’t think anybody is scared of the competition,” Lamsargis said. “It’s just making everybody equal and collecting the same items as far as taxes and things of that nature.”
Contact Patrick Yeagle at firstname.lastname@example.org.