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Fred Clements: An internet sales tax rant

Published November 8, 2013
A blog by NBDA executive director Fred Clements

Editor's note: This blog post was written by Fred Clements, executive director of the National Bicycle Dealers Association. Clements' previous blog posts can be read on

It is outrageous that the federal government continues to give the middle finger to brick-and-mortar businesses across the country by failing to fix a broken sales tax system.

It's time for the House of Representatives to take a deep breath, put down the poison darts, and get to work on this issue.

It's possible that our elected representatives may just be tired and/or stressed out. After all, they have been busy with various tantrums, government shutdowns, bad health care websites and general ill will.

But this does not excuse the fact that brick-and-mortar businesses are being openly discriminated against with bad laws that can only be fixed by the adoption of good ones. This is not a big government versus small government issue. This is about good government versus bad government and the current situation is baaaaaaad.

To be clear, this is not the Internet's fault. There is nothing wrong with Internet retailing, and if consumers choose to buy from Internet retailers, many also with physical stores, that is their right.

But favoring one form of retailing by allowing it to dodge taxes is an abomination, a vile and horrible disgrace, not only a black eye for the world, but destruction of both eyes, a nose and an arm.

To its credit, the U.S. Senate approved a sales tax reform bill in May. The President has indicated that he would sign reasonable legislation in this area. Now it's time for the House of Representatives to get off their collective buttocks and make it happen.

Other than this single issue, the free marketplace is mostly working in the bicycle industry as we all adapt to the Internet. Consumers are freely making choices on where and how to buy from the available options. Vendors are more often making deliberate choices on how they want their products to be represented and by whom, and are increasingly realizing the risk to themselves from commoditization. Retailers are making choices regarding the products they choose to carry based on many criteria, including the retail price being offered by Internet competitors.

The bad actor right now is the U.S. government, particularly members of the House. They are responsible for assuring a level playing field for businesses, but are doing the opposite. It is irresponsible to allow this travesty to continue any longer.

In September, the NBDA and other trade associations sent a letter to the House Judiciary Committee urging them to take up the cause. It read in part:

"The problems inherent in the current collection system significantly harm local businesses, fostering an inequity in the marketplace that we believe is not sustainable. A hearing would allow for constructive dialogue that would move us on the path to leveling the playing field for small businesses such as ours.

"As it stands, large, online retailers enjoy a significant and unfair competitive advantage when they sell to consumers and are not required to collect and remit sales tax. This has resulted in an ever-increasing number of consumers eschewing local, small businesses in favor of online retailers to avoid paying the required sales tax. Compounding matters, with the advent of smartphones, some consumers will spend considerable time at their local stores, seeking recommendations for products from knowledgeable store staff, and, then, these customers will purchase the items on their smart phone to avoid the sales tax, often in the bricks-and-mortar store.

"Opponents of sales tax fairness are asserting that it is being advocated by large chain retailers that want, in their words, 'to crush' small businesses with burdensome tax regulations. This argument could not be further from the truth. Our coalition of independent associations has been advocating on behalf of sales tax fairness since 1999. Small business owners were the first to feel the effects of this unlevel playing field, but, as e-commerce has grown, it is telling that it now affects retailers of all size.

"In late July, the Roanoke Times published an editorial in strong support of sales tax fairness, noting, "Business leaders in the RoanokeValley and beyond have been clear and consistent in their support for the Marketplace Fairness Act.... Owners of local businesses noted that they are the victims of government-imposed tax discrimination under the current system. The merchants aren't seeking an advantage for themselves, just fairer rules. They pointed to a new study that suggests fairer taxes would benefit the economy, generating an estimated 23,600 jobs in Virginia over the next 10 years and 1.5 million nationally."

The letter was signed by 18 associations and groups representing independent businesses. It's time for the House to take action.

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