May 30, 2012

Sen. Cardin and retailers support taxing all Internet sales

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By Dana Amihere
Dana@MarylandReporter.com

Jim Adams of the Falls Road Running Store. (from a video by National Retailers Federation.)

Jim Adams of the Falls Road Running Store. (from a video by National Retail Federation.)

Walk into most retailers in the country and your receipt will show how much you paid in sales tax on your purchase. Order the same product online, and in many cases, it’s gone.

Supporters of the Marketplace Fairness Act, including co-sponsor U.S. Sen. Ben Cardin, D-Md., say that this disappearing act is only taking money out the pockets of retailers with a physical presence.

Improved Internet tax law, said Cardin, would’ve helped Maryland capture $375 million in revenue, enough to solve the doomsday budget crisis in Annapolis and eliminate the need for the special session of the legislature.

(A University of Tennessee study estimates that Maryland will lose approximately $184 million in uncollected sales and use tax revenues from remote sales in 2012, according to a Department of Legislative Services presentation last year, page 20.)

Survey shows public support

According to a study conducted by the National Retail Federation, an umbrella group of more than 100 national and international retailers, 60% of Americans believe state sales tax should always apply to online sales.

Although the NRF represents stores with a storefront as well as catalog and Internet sales, the trade association has launched an intensive 60-day media campaign to “level the playing field” for brick-and-mortar “Main Street” businesses.

A series of U.S. Supreme Court rulings have found that states cannot tax sales of merchants that do not have a physical presence in the state, and Congress extended that in a 1998 law. Previous attempts to change the law at the federal level have failed.

Despite support of the e-fairness bill though, an increasing number of shoppers are going online to avoid the tax.

“It really hurts to spend time with a consumer in our store and watch them walk out the door with their phone in their hand saying ‘I think I’ll buy it from this place on the Internet,’” said Jim Adams, owner of Baltimore’s Falls Road Running Store. Adams appears in this video by the trade group.

Ultimately, says Cardin, this only hurts the state’s retailers. “Maryland retailers aren’t looking for special treatment but simply a fair way to compete against large Internet sellers who charge similar prices but get away without collecting sales tax.”

Retail supports one-fifth of jobs in every state, about 742,000 jobs in Maryland. Directly and indirectly this accounts for about 16% of the state’s Gross Domestic Product.

“The $24 billion in lost sales tax is revenue badly needed by cash-strapped state and local governments to pay the salaries of essential workers such as police officers, firefighters, ambulance crews, and schoolteachers,” the National Retail Federation reported. “All of those public workers are among retailers’ customers, and when customers lose their jobs retailers lose sales.”

Losses may only get worse

According to an online retail forecast report produced by Forrester Research, Inc., online retail shopping will increase 10% each year until 2016 accounting for 9% of total retail sales. This is up from 7% in both 2010 and 2011, the report said.

Aggressive merchandising and the increasing ubiquity of smartphones and tablet communications encourages more impulse online purchases, said Sucharita Mulpuru, a Forrester analyst.

Adams said that without an Internet tax the the gradual shift from in-person to e-commerce will result in a loss of customer-centric relationships.

“I think as the online business becomes a bigger and bigger part of the American shopping experience, the next generation’s going to lose that ability to go in and have a hands-on experience in a small specialty store because they’re not able to compete at at that broad national level,” Adams said.

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  • Gigigirl2816

    Sales tax and shipping costs! Guess I won’t buy much on the internet. That really won’t be a problem since I’m a state worker and I barely make enough to make ends meet.

  • Pingback: Sen. Cardin Say Internet Sales Tax Would Have Solved “Doomsday Budget” Crisis()

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  • They can’t spend responsibly so tax us more, it’s the Maryland way. People’s Republic of Maryland Supreme Leader Owe Malley is never wrong comrades!

  • abby_adams

    Hey Maryland politicians here’s a novel idea, LOWER the sales tax to increase competition.  Cardin & his fellow Dems can only come up with one solution, RAISE taxes. Maybe he should suggest that the Senate do the work & PASS A BUDGET?  After all it has only been more than 1000 days since they’ve done their job. As for more $$ flowing out of my pocket, maybe Obama, O’Malley & all the state Dems should remember IT’S MY $$ that you are spending pandering for votes. I support local business with my $$. If you stopped OVER TAXING, slapping higher fees & tolls on top of higher property taxes to support the spending addiction, I’d have a few more $$ to spend. It’s only common sense. A commodity that is in extremely short supply in Washington & Annapolis.

  • JGwen

    In buying a PRODUCT, it seems to me I have a choice…pay a sales tax to Maryland with its pathological spending and taxing disease or pay a shipping charge. Of course Maryland will still extract its pounds from the shipping companies, except maybe USPS which sorely needs the income. Maryland politicians should appreciate the animosity they engender with their profligate spending and hard to match taxations! Local brick and mortar venders would do well to recognize the disservice State politicians are visiting on them with state tax rates (which the politicians plan to consider expanding and increasing) as they cast about in search of villains. 

  • What does a U.S. Senator have to do with a Maryland sales tax increase?  Nothing!  This is an issue for the Governor and the General Assembly!  This is a bare-faced political ploy to get brick & mortar merchants to think that Sen., Cardin has their interests at heart.  When in fact, he has no influence over the debate and should stop his blatant pandering.  If he paid more attention to “his job” we might fix some of the serious issues facing our Nation.  Instead he just wants to stick Marylanders with another tax increase.  Sen. Cardin only emerges from his Washington chrysalis every 6 years like a ciccada to show faux interest in Maryland, and immediately retreats to it after his election victory.  What has he done for us besides increasing spending and taxes?  Let’s retire this do nothing politician in November and elect Dan Bongino. 

  • Rockin Rob

    O’Malley raises the sales tax in Maryland from 5% to 6%, and now complains that the retailers can’t compete because of the sales tax. Hummm? What to do, what to do? 

  • Sten Wilson

    With growing state populations and increasing demands placed on state and local governments residents need to pay existing taxes due that states rely upon to fund the education, police services, fire services, social services, infrastructure and many more necessary programs. The problem is a direct result of residents supporting and increasing demand for State services through ballot initiatives while simultaneously evading the sales and use taxes intended to provide funding. State budgets account for legal tax due as a source of funding. 

    A sale is a sale. Sales/use tax has been the honorable obligation of the consumer in most states since 1935. This is in no way a new tax. Bipartisan legislation to simplify existing tax schemes benefiting all businesses, local governments and consumers is excellent, much needed and long overdue. Whether tennis balls are bought online or locally they are taxable in the jurisdiction of use no matter their origin or place of production. All retailers whether online, brick and mortar, or catalogue should be grateful to their consumers doing everything possible ensuring the highest quality product, fairest price, highest level of customer service including the simple collection and remittance of sales tax due. Removing the pesky task of use tax tracking and remittance from individual returns, and returning sales and use tax proceeds back to their consumers’ jurisdictions funding education, local medicare, infrastructure and so much more should be a top priority of all businesses.

    States also strongly desire to undue harmful tax schemes and and increases resulting from their constituents tax evasion over the past years. Higher property taxes are forcing rent increases challenging families ability to stay in homes. West Virginia favors eliminating existing harmful tax on groceries favoring being enabled to efficiently collect use tax already due. Other states wish to remove harmful estates taxes. Tennessee has no desire to impose an income tax on residents, but may have to as local businesses close, jobs are lost and sales and use tax continue to be evaded by residents and uncollected by Internet merchants. Connecticut residents are now enduring the highest tax increase in State history to compensate for evaded sales and use tax revenue.

    Technology freely available on the Internet makes tax processing simpler than processing shipping for any business.  I strongly support and urge Congress to immediately pass S.1832 the Marketplace Fairness Act, and ask that all state legislators do the same.

    Cite as: 504 U. S. 298 (1992) 333
    Opinion of White, J.

    Although Congress can and should address itself to this
    area of law, we should not adhere to a decision, however right
    it was at the time, that by reason of later cases and economic
    reality can no longer be rationally justified. The Commerce
    Clause aspect of Bellas Hess, along with its due process holding, should be overruled.

    • JGwen

       “To fund the education, police services, fire services, social services,
      infrastructure and many more necessary programs. The problem is a direct
      result of residents supporting and increasing demand for State services”

      Sounds very righteous … except that, in this State in particular, tax moneys are going for lots of less legitimate purposes and discretionary pursuits. In these times of high unemployment and particularly private sector financial hardships … moneys are going for parks, public lands, government “investments” in friends of politicians schemes, unsustainable government retirement systems, etc. Substantial government “investments” (and opportunities) are being devoted to furthering the causes of “New [Undocumented] Americans.” Government employees in Maryland that are not union members are now getting to devote their increased salaries in payments to the Union (to then be further cycled into political donations???).

      It may be high time for “residents” (as opposed to citizens???) be advised their “increasing demands” relate to initiatives that in these times are discretionary and unaffordable or are things their local communities should be funding for themselves if they care enough to.

      The answers to more taxations are to just say “NO!!!” The “internet tax” is simply another symptom of Maryland’s spending disease.On the other hand as suggested above … I believe I am wholly taxed out …. I not only don’t buy discretionary Products, I’m not buying Needed Products or Services. I work every hour available to me and do not ask for Government discretionary or Social largesse’s. It’s about time each individual, particularly including “politicians,” become fiscally responsible spenders!

      • Dale McNamee

         JGwen,

           I couldn’t have said it better !

  • Lifechangesconstantly

    SO Senator CARDIN……are YOU and our WONDERFUL  TAX and SPEND LIBERALS here in the “FREE”  State, going to be waiting us CITIZENS when we return from our neighboring DELEWARE, after we choose to purchase our GOODS  there because they DON’T have SALES TAX!!!!

    Look at the solution this way……as a POLITICIAN SIR……, TAXES are a PRIVELIDGE for you to collect, not A RIGHT!!
    The SOONER  YOU GUYS understand that, we will all be better off!   

    You Comment about how much money our state has lost in revenue…….YOU GUYS WOULD HAVE ALREADY HAVE SPENT IT!!,
    CONTROL YOUR SPENDING…..problem solved!

    How do All the States ( like Deleware) even exist without–without–without–( i almost don’t want to type it again, i know what pain this must cause you)     SALES TAXES……there i said it

    • Dale McNamee

       Lifechangesconstantly,

       Great post ! Now, if we can get rid of these parasites…