By Matthew Shay
When the Supreme Court ruled in 1992 that online sellers could only be required to collect sales tax in states where they had a physical presence, the ruling hardly mattered. Giants like Amazon and eBay had yet to be founded, and the multibillion-dollar world of e-commerce was barely a dream.
The world has changed. E-commerce has exploded, fueled in part by a price advantage of as much as 10 percent by virtue of not having to collect sales taxes. Main Street stores that provide good local jobs and support local communities are struggling to survive against online, out-of-state competitors who do neither.
And it's not just retail that has been affected - state and local governments are laying off police officers, firefighters, and schoolteachers as close to $25 billion a year in sales tax goes uncollected.
As a result, brick-and-mortar retailers have been asking Congress for more than a dozen years to pass legislation that would level the playing field by allowing states to require all online sellers - both brick-and-mortar and online - to collect regardless of physical presence.
The legislation finally won Senate passage in 2013, but has stalled in the House over minor differences most observers outside the Beltway would never recognize.
If something isn't signed into law by the time the current session of Congress ends, the Senate bill will die and the difficult, lengthy process will start all over again. We can't let that happen.
Opponents claim they are protecting consumers against new taxes and small online sellers against huge compliance burdens. But the truth is that failure to act would do far more to harm both consumers and small businesses.
Let's take taxes first. Critics have long claimed that requiring online sellers to collect sales taxes would constitute a new tax.
The truth is that consumers are already required by law to report untaxed sales on their state income-tax returns and pay the tax then. Few are aware of the requirement and fewer comply. But if sales-tax-fairness legislation isn't passed, states could decide to start enforcing the requirement - creating a nightmare for consumers across the country.
Even if that doesn't happen, the loss of revenue places increasing pressure on states to raise other taxes - such as income or property taxes - to make up the difference. And states without such taxes could even be pressured to create them. Most voters would probably agree that it's better to collect a tax that's already owed than to raise other taxes or create new ones.
Critics also have claimed that being required to collect would create an undue burden on small businesses. In fact, the pending legislation requires states to provide sellers with free software making sales tax collection as easy as calculating postage.
By contrast, failure to adopt a national standard would lead states to continue experimenting with new laws and approaches to capture the revenue, resulting in a far more complex system of requirements that vary from state to state.
Retailers aren't asking for a new tax. They're just asking for a level playing field where everyone plays by the same rules and one branch of the same industry isn't given an unfair advantage over the other. It's time to pass sales tax fairness.