Over the weekend, Alabama Gov. Robert Bentley voiced his support for the so-called Marketplace Fairness Act, which should be more approprietly named the Internet Sales Tax Mandate. Bentley estimated that Alabama’s beleaguered General Fund budget would gain roughly $150 million a year if online retailers were forced to collect taxes for things they sell online to consumers all over the country.
The U.S. Senate passed a bill last year that exempted businesses with under $1 million in annual revenue from having to collect the tax, but Rep. Spencer Bachus, R-Vestavia Hills, is said to be working on a new version of the Internet Sales Tax Mandate that would remove that exemption and impact all small businesses.
Here are just 7 of the many reasons Alabamians should oppose the Internet Sales Tax Mandate:
1. It hurts small businesses
Many proponents of the Internet Sales Tax Mandate are trying to make this out to be a fight between the Internet and Main St. — big, bad online retailers vs. your local mom & pop shops. In reality, the online retailers who would be hit by this tax are small businesses, just like the brick and mortar stores in your local community.
It’s the big box stores who are spending millions of dollars to pass this legislation. Small businesses should be banding together to fight this overburdensome tax, not allowing propaganda funded by large corporations to tear them apart.
This legislation would have a direct negative impact on small businesses, which employ over half the U.S. population and are responsible for the vast majority of new job growth in recent years.
2. This is exactly the kind of thing Reagan opposed
The Internet is the one place left where there are low barriers to entry for entrepreneurs. We are seeing massive economic growth online. The Internet has given local brick and mortar stores the ability to have a worldwide reach. Why would the government want to stifle that?
Oh, actually, President Reagan told us why…
“Government’s view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it.” – Ronald Reagan
3. It’s not the “silver bullet” states think it is
If an online retailer has a physical location in a state, customers located in that state are already paying sales tax for their products. 9 of the top 10 retailers in the U.S. already collect sales taxes for 100 percent of the country. Big companies like Best Buy, Wal Mart and Apple are already collecting taxes pretty much everywhere because they have physical locations all over the country. Amazon is opening distribution centers all over the United States because they want to offer same-day delivery on as many items as they possibly can.
In other words, the companies from which a big chunk of sales tax revenue comes are already paying the sales tax the Internet Sales Tax Mandate advocates say it would help collect. States that think its a silver bullet for their budgets are wrong.
4. It reduces competition
This is why the giant companies with high paid lobbyists love it. The Internet made it possible for a mom & pop store to compete with the giants. If they sell a better product at a better price, they can now reach potential customers all over the world. That has made the Internet a consumer’s dream.
But history has proven that the big boys don’t like all that competition. Once most companies reach a certain size, they tend to try to increase the barriers to competition, rather than continue to innovate. Some of the largest corporations in the world are pushing the Internet Sales Tax Mandate because they can afford to take on the costs of calculating and collecting sales taxes in different jurisdictions all over the country, where their smaller competition cannot.
5. It hurts consumers
Pushing out mom & pop shops, which this legislation will do, leaves consumers with fewer choices.
On top of that, anyone with an elementary understanding of economics knows that when the government imposes a new tax or regulation on a business, they pass that cost on to their customers.
The Internet Sales Tax Mandate will cause consumers to pay more for the products they buy online.
6. Widespread “showrooming” is a myth
“Showrooming” is one of the reasons misguided brick and mortar retailers want the Internet Sales Tax Mandate. “Showrooming” takes place when a customer sees a product in a store, but decides to go home and buy it online instead.
But this entire concept discounts one of the main reasons people shop online in the first place — convenience. If I’m already in a store and see a product I want to buy, why would I leave the store, go home, get one the computer, find it again, order it, then wait a week for it to get to me?
Studies have shown that “showrooming” is extremely rare.
7. Conservative groups you trust oppose it
The Heritage Foundation, Americans for Tax Reform, Freedomworks, Madison Project and just about every other conservative group you know and trust opposes the Internet Sales Tax Mandate. Small government conservatives like Sens. Ted Cruz, Rand Paul and Marco Rubio oppose it as well.
Follow Cliff on Twitter @Cliff_Sims
