Bill seeks consistent sales tax collection, level playing field for retailers

Steve DeVerger, left, buys items from cashier Whitney Robbins at Game Masters in Quincy. Store owners who collect state and local taxes see themselves at a disadvantage to online retailers that donít. (H-W Photo/Michael Kipley)
Posted: Mar. 4, 2013 10:38 am Updated: Mar. 25, 2013 12:15 pm

Herald-Whig Senior Writer

Legislation proposed in Congress to close a loophole that allows out-of-state retailers to avoid paying sales and use taxes is dividing the business community.

The Marketplace Fairness Act of 2013 is supported by the National Retail Federation and opposed by the American Catalog Mailers Association. Many business leaders say they don't want to support a plan that hikes taxes. Others say the current system is unfair to brick-and-mortar retailers.

Don Taylor, one of the owners of GameMasters in Quincy, knows all about the complexities of tax law. If a customer from another state orders something delivered from the Quincy store, Taylor's people follow rules and collect sales and use taxes.

Some cities have their own taxes, in addition to state and other local taxes. A Missouri seller shipping items to customers in Quincy and Camp Point would find different tax rates -- if they collected taxes at all.

"It can get complicated finding out exactly how much tax is owed in some areas. That's a big issue to handle," Taylor said.

On the other hand, he knows many online and catalog retailers do not collect those taxes. That gives them a competitive advantage, he said.

Taylor said some shoppers come into the store to check out name-brand outdoor gear or other items. They can see, touch and even try on clothing items. A certain percentage of those people then go home and order the same item online to avoid paying the tax. The practice is known as showrooming.

"That happens, pretty regularly. Sometimes it works out to our advantage and sometimes it doesn't," Taylor said.

"We try to use customer service as an added reason to buy from us."

Best Buy was cited in a December poll by Harris Interactive as the U.S. retailer that suffers the most from showrooming. According to respondents, 24 percent of Best Buy's shoppers said they check out in-store items before ordering them from other sources.

Best Buy officials announced that starting Sunday, they will counter showrooming by enacting a permanent policy to match the price offered by all local retailers and 19 online competitors.

Wal-Mart ranked second among retailers hit by showrooming, with 22 percent of survey respondents saying they would check out products in Wal-Mart and then order elsewhere.

Amazon was the biggest online winner, with half of its customers saying they had checked out products in stores first.

Sen. Dick Durbin, D-Illinois, said the Marketplace Fairness Act would close loopholes that unfairly favor online sellers.

"Businesses in Illinois aren't looking for a handout from Washington. They don't want special treatment. All they want is a level playing field," Durbin said.

The legislation is a bipartisan attempt to resolve differences between House and Senate versions of rival bills from last year.

Taylor said nobody wants to pay more tax on anything, so business owners may want a level playing field, but don't want to endorse the greater tax collection rules in the legislation.