CARSON CITY – The National Retail Federation has launched a nationwide 60-day campaign to raise awareness among lawmakers and the public on how what it calls a loophole exempting online sales from sales tax is hurting local communities and job creation.
If Nevada’s five-member Congressional delegation is any indication, the group has its work cut out for it, with three members opposed and two supportive of the idea to allow states to tax online sales.
“Our current sales tax system unfairly favors one set of retailers over another,” NRF President and CEO Matthew Shay said. “Congress is naming winners and losers by its failure to address this issue, and the brick-and-mortar retailers who create jobs across our country want action on this issue now.”
The national push, begun earlier this month, comes on the heels of Nevada Gov. Brian Sandoval’s agreement with Amazon to begin collecting sales taxes on Nevada online purchases beginning Jan. 1, 2014, or sooner if federal legislation is passed to allow states to collect revenues from internet purchases.
The agreement also calls for the state and the Fortune 500 company to work together for immediate enactment of federal legislation that will address the needs of states, retailers and consumers by creating a simplified and equitable framework for sales tax collection.
But members of Nevada’s Congressional delegation are divided on the question.
U.S. Sen. Dean Heller, R-Nev., and Rep. Joe Heck, R-Nev., have previously said they oppose such legislation, called the “Main Street Fairness Act.”
Rep. Shelley Berkley, D-Nev., is also opposed.
“We need to ensure that Nevada’s small businesses have the tools they need to grow and create jobs without burdensome taxes and additional red tape,” she said in a statement issued Wednesday. “For this reason, I will continue to support unrestricted Internet sales in Nevada and throughout the U.S.”
Rep. Mark Amodei, R-Nev., who participated in a hearing on the issue last year as a member of the House Judiciary Committee, said Wednesday he is open to the idea, depending on the specific wording of a measure that would come up for a vote.
The current system of ignoring Internet sales while collecting sales taxes from local retailers is an “artificial tax administration policy I don’t think anyone approved,” he said. “It just kind of happened. I would sure like to look at something.”
Retailers of all types should be playing on the same field for tax purposes, Amodei said.
A statement from the office of U.S. Sen. Harry Reid, D-Nev., said he also supports giving states the authority to require online retailers to collect their sales tax.
Three Republican candidates seeking the 4th Congressional seat in the 2012 general election recently spoke in favor of such legislation in a debate on the Face To Face television program. Barbara Cegavske, Danny Tarkanian and Dan Schwartz all said they favored such legislation.
Sandoval estimates Nevada will receive between $15 million and $20 million a year under the agreement with Amazon, which mirrors those signed in several other states. Tax revenues to Nevada could total $200 million a year if all online purchases were assessed the state sales tax, he said. Nevada’s sales tax rate varies by county and ranges between 6.85 and 8.1 percent.
Sandoval recently said he pursued the agreement after the online sales tax collection issue was brought to him by the Retail Association of Nevada (RAN), which praised the deal announced in April.
Bryan Wachter, director of Government Affairs for RAN, said the national campaign is aimed at educating the public and policy makers. While “mom and pop” stores on Main Street are required to collect the sales tax, Internet companies have been treated differently, he said.
“Even though they’re both doing the same amount of business for the same customers, they are treated as two different entities and we just think that needs to stop,” Wachter said. “Government should create level playing fields and allow the market to be able to decide what business model works and doesn’t work. And so that’s really the main focus of the E-Fairness campaign, is government should treat everybody the same. Fair is fair.”
The proposals in Congress are asking that states be allowed to decide if they want to collect sales taxes on internet sales, he said. A lot of states have budget problems right now that could be partially addressed with such revenue, Wachter said.
There are a lot of struggling businesses in Nevada that face an additional hurdle because of the sales tax issue, he said.
Shay said the federation will mobilize the retail industry, “so every retailer – regardless of whether they sell their merchandise online, through the mail or in a store on Main Street – can compete on a level playing field. This debate is about local retailers who make major contributions to their local communities being forced to operate in an unfair sales tax environment while out-of-state competitors are handed a huge advantage.”
The campaign includes an online petition that merchants and consumers can sign, a series of videos featuring small retailers talking about the competitive disadvantage they face, and print and online advertising in targeted states and congressional districts.
The sales tax issue was created by a 1992 U.S. Supreme Court decision in Quill v. North Dakota that ruled that “remote sellers” – which include Internet, mail-order and “1-800” sellers on radio or television – can only be required to collect sales tax in states where they have a physical presence, such as their headquarters or a store or warehouse.
Shay said the court ruling means that most online sales go untaxed and has placed local retailers at a competitive price disadvantage. It also costs state and local governments an estimated $24 billion a year in tax revenues.
“Retail is retail, be it online or in a store,” he said. “All retailers should compete on a level playing field with the same set of sales tax rules. It is only fair.”
Bryan Wachter with the Retail Association of Nevada says the two types of businesses are being treated differently and the practice needs to stop:
Wachter says government should treat everybody the same: