Why online equity matters
The Marketplace Equity Act will correct a pre-Internet-era wrong by unsnaring a loophole that permits online-only retailers from collecting or remitting a state's sales' tax if they're physically located somewhere else. In practice this gives online outfits up to a 10 percent price advantage over local retailers.
In Washington state, with its no-income-tax obstinancy, the retail sales' tax remains the state's prime revenue spigot. As a result, Washington residents get buffeted by the understated wisdom of the late Sen. Everett Dirksen. A million here, a million there. Pretty soon, you're talking real money.
In a statement last week, Washington Gov. Chris Gregoire underlined the political and economic stakes. "Without updates to these laws, Washington state alone stands to lose $446 million in state and local sales-tax revenue to untaxed Internet commerce in FY 2013," Gregoire said. "That places local retailers, often small businesses, at a competitive disadvantage. As is too often the case, buyers use these small retailers as the showroom to view and compare products, to only later buy the same product online."
One of the bill's sponsors, Rep. Jackie Speier of California, noted in a compendium of the bill that, "This special treatment has the effect of the government picking winners and losers in the marketplace, and local businesses simply cannot compete over the long-term with online giants that have a competitive advantage based on government policy."
The genesis of the online-tax dodge loops back to 1992, that pre-Google stone age, when the U.S. Supreme Court ruled in Quill v. North Dakota that states can't force the tax-collection question unless Congress authorizes it. Because online retailing is tangled with interstate commerce, any corrective needs to emanate from the feds and not the states.
What, then, of non-bigshot retailers who market and sell online? The legislation contains a critical small-business exemption that lets companies off the tax-collection hook if they generate $1 million or less in sales nationally.
The argument for marketplace equity hangs together so cleanly that the proposal has earned bipartisan support. In Congress' ante-logjam days -- before many of us were born -- consensus would be sufficient to ensure passage. Not today. Email or phone your member of Congress to encourage his or her vote.