OTTUMWA —
Sell via the Internet from your garage in Los Angeles, and you don’t have to charge sales tax in Iowa. Open a business in Ottumwa, and you must charge Iowa customers state sales tax.
Officials in Washington, D.C., as well as trade groups are saying that’s unfair.
It’s not that Ottumwa business people have ill will toward Internet sellers, said Linda Gardner, president of Bailey Office Equipment in downtown Ottumwa. But they do, she said, want rules that apply to all businesses fairly.
As federal regulations stand now, one state cannot hit a business in another state for sales tax. So there’s an unfair advantage for online sellers, retailers say. But Congress may change that and allow states to charge sales tax for purchases made on the Internet.
“I think it’s a good idea,” said Kristie Durflinger, owner of The Bridal Cottage in downtown Ottumwa. “It would make it more competitive.”
Several Iowa legislators and the governor support the right of states to collect sales tax from online sales made to customers in the state.
And this week, the National Retail Federation (NRF) released a statement saying, “America’s brick-and-mortar merchants deserve a level playing field where everyone plays by the same sales tax rules.”
Durflinger spends money here, she said, hires employees from the area and contributes to the local economy. While a 7 percent discount may not sound like much, on wedding dresses, sales tax may be $70.
“Who wouldn’t want to save $70?” she said.
Ottumwa retailers either charge their customers an extra $70 over what online retailers are selling, or, to stay competitive, need to offer a bigger discount and personally take the loss to compete.
Gardner says her business, and others, find some of their biggest competitors are out-of-town businesses selling over the Internet. With office supplies over the course of a year, office managers see that an extra 7 percent “discount” really adds up.
The retail federation says they just want a level playing field.
In his most recent statement on the subject, Congress Judiciary Chairman Lamar Smith said the “Marketplace Equity Act” has bipartisan support.
“Online retailers ... enjoy a competitive advantage over traditional retailers,” he said.
Though online and catalog sales may have a shipping charge, those are often waived for purchases above a certain amount.
Keith Caviness, co-owner of The Photo Shop in Ottumwa, said he supports the idea but wants to know more about how the process would work. For one thing, many business owners make some wholesale purchases online, for which they’ll charge state sales tax to retail customers who buy an item.
Additionally, the collecting of sales tax from businesses on the Internet seems like it could be complex, he said.
It is that difficulty for mail-order retailers which led, in part, to the U.S. Supreme Court’s former decision: States can’t make an out-of-state retailer mail taxes to the 9,000 different state, county and local taxing jurisdictions in the United States.
The Marketplace Equity Act would allow states to make the decision on whether those who sell in their state should collect sales tax.
“But,” added Smith, “state and local governments [would need to] simplify their tax policies if they want to collect sales taxes from out-of-state retailers.”
Local News
August 4, 2012
Merchants want fair sales tax laws
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