While transactions with large companies that have distribution centers in New York State are subject to sales tax, other online sales are not. A proposed federal law would require that all online transactions be taxed. This would “even the playing field” according to its supporters, which include groups representing small businesses.
“A sale is a sale, no matter where it takes place,” says David B. Henry, chairman of the International Council of Shopping Centers. “By not having to collect sales tax, online retailers have a distinct competitive advantage over their local retail counterparts.”
Some local businesspeople agreed.
“It’s only fair, isn’t it?” says Cheryl Rice, manager of the Inquiring Mind Bookstore & Café in Saugerties.
Others feel it’s not their place to decide how people should be taxed.
“I just show up every day and run my business as I see fit,” said Ernie Saker of Saker Guitar Works in Kingston. “As far as taxing Internet sales, I am opposed to it. Drumming up envy in order to further tax people is by my reckoning quite immoral.”
‘Do we want to be a country that just mails things to each other in boxes from warehouses, or do we want some kind of meaningful contact with each other?’
Interstate commerce is complicated
“Taxes aren’t really what’s hurting Main Street,” says David Friedman of Barner Books in New Paltz. “Nationally, the issue should be addressed – it’s the fair thing to do – but the issues [for small-business owners] are broader than that.”
Barner said it’s hard to compete with online retailers on price, in part because the costs of operating an online business are so much less. Plus, a huge company like Amazon can sell books at a loss knowing the same customers will return to purchase items with better margins.
Plus, there are inequities in the way that sales taxes are collected that favor the large retailers, he says.
“Interstate commerce is very complicated,” said Friedman. “While Amazon does collect sales taxes on items they sell in New York, they don’t collect the sales taxes on items they sell for their vendors.” Many business owners of brick-and-mortar stores affiliate themselves with large retailers like Barnes & Noble or Amazon, and sell items through the larger companies. Because the large retailers don’t collect sales taxes on those sales, though, the small vendor is left responsible for payment of those taxes out of their own pocket. “It’s a sort of penalty for the small-business owner,” says Friedman.
What’s at stake
Most business owners framed the argument in the familiar “buy local” terms. Shopping on Main Street is important, they say, because it grows the local tax-base and keeps the community vital.
“What this conversation really should be about, beyond how we get taxed, is, what do we want our communities to look like?” said Jessica DuPont, owner of Half Moon Books in Kingston. “Are we citizens, or are we consumers? Do we want to be a country that just mails things to each other in boxes from warehouses, or do we want some kind of meaningful contact with each other?”
Rice said local stores have other advantages online stores could never replace. “People come into the store for the experience of being here, and for a place to hang out,” she says. “They come for the personalized “face-to-face” customer service that you can’t get online.”
Jacqueline Kellachan has owned the Golden Notebook in Woodstock for about a year now. The store has been a fixture since 1978. “I really believe in the role independent bookstores play in the community,” she says. “Something may seem cheaper online without the tax, but our local business supports our local community. Amazon doesn’t host authors, or raise money for community groups like we do.”
Kellachan competes with online vendors by maintaining a website for the store, offering customers the opportunity to order online but get free shipping if they pick up their purchase at the store. She observes that the law at present “is only the way it is because at the time the laws were written, things were different.”
According to Henry, the last time the sales tax collection issue was challenged at the federal level was 1992, before Amazon and Ebay existed. Henry says that changes in the laws are necessary, because Internet sales are growing four times faster than sales at brick-and-mortar stores, and Internet retail is a $43-billion business, and growing exponentially.
Kellachan supports the Main Street Fairness Act in principle. She’s concerned that if things aren’t evened up with online retailers, more independent bookstores will go out of business, like Red Fox Books in Glen Falls, which announced just last week that it’s closing. Kellachan believes that the current sales tax collection laws do give online retailers an unfair advantage. “It totally kills the independent bookseller. Just look at how hard Amazon.com is fighting this – they’re fighting it tooth and nail. They don’t want this.” ++
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