Meadville Tribune

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October 18, 2011

E-commerce raises question of sales tax fairness

NORMAL, Ill. — Dick Smith thrives on competition. At 69, he braved the heat and sandstorms of the Saharan desert to compete against rivals half his age this summer on ABC’s adventure reality show, “Expedition Impossible.”

Smith was edged out before he could reach the finish line, but the retired Army Ranger felt he’d been in a fair fight. He doesn’t say the same for the small-store business climate to which he returned and relies on for his livelihood.

Smith contends his outdoor-gear store in this central Illinois college town is forced to play by unfair tax rules that compel him to add almost 8 percent in sales tax to a customer's bill, but exclude his online competitors from the same burden.

“I have people come in here all the time who tell me they can get their gear cheaper online,” Smith said. “When I have to add on that sales tax, it isn't tough math to do.”

Smith is among a growing chorus of bricks-and-mortar small businesses protesting what they see as tax law inequities driving them to the brink by requiring they collect and remit sales taxes while their electronic counterparts prosper through tax-free goods and services.

Studies show more than 1 of every 4 dollars in purchases covered by sales taxes go uncollected in the U.S. because of online transactions, adding up to an estimated $12 billion annually in lost revenue, according to the Center for Business and Economic Research at the University of Tennessee.

The biggest beneficiaries are Amazon, eBay, Overstock and other giant online retailers that operate almost entirely in cyberspace. But there are also a multitude of smaller Internet businesses that reap the rewards of tax-free commerce. They object to collecting sales taxes because of the varied rates and exemption rules across the country.

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