Published on June 19, 2014

OTHER VOICES: Time to end unfair advantage of online-only retailers

(Crain News Service photo)
Imran Jooma

By Imran Jooma

CHICAGO (June 19, 2014) — Over the past 10 years, and the past five years in particular, the retail industry has fundamentally changed.

More and more people are shopping online, and Sears Holdings Corp. has been at the forefront of innovative technologies that allow our customers to shop how they want, where they want, when they want. That includes online, mobile and in our brick-and-mortar locations.

One of the greatest threats to retailers and to state and local governments—which predates the Internet—gives online-only sellers a huge competitive advantage over retailers with physical locations. Because of a 1992 Supreme Court ruling, online-only sellers like Overstock.com and Amazon.com, in many cases, are able to skip out on collecting the sales tax that is due, leaving customers with the burden of paying the tax on their own. Many online-only retailers even engage in deceptive marketing practices by telling consumers a purchase from their site will be tax-free.

This discrepancy results in a perceived price advantage for out-of-state sellers of almost 10 percent in Illinois, hurting businesses like ours that have been investing in local communities for more than 125 years.

When the sales tax is not collected by the merchant, customers owe a use tax and are supposed to declare it when they file their taxes with the IRS each April—much like a self-employed individual must pay any income taxes due when an employer is not withholding it.

The problem with the use tax is that consumers rarely pay it and states cannot adequately enforce it. Turning a blind eye to tax avoidance has forced retailers, large and small, to shutter, taking the local tax base with them. Government is picking winners and losers, and the losers are the job providers.

Time for Congress to act

Poised to enact yet another bill leveling the playing field between its local retailers and online-only sellers, Illinois, for example, has done virtually all it can to end the current disparity. It’s time for Congress to act and restore basic free market competition.

Last year, the U.S. Senate passed the Marketplace Fairness Act with strong bipartisan support. The bill was championed by Illinois’ Democratic Sen. Dick Durbin and a number of his Republican colleagues.

But since the Senate vote, the issue has languished in the House of Representatives. Congress should not let another day—let alone another holiday shopping season—pass without leveling the playing field for all retailers.

Ideally, if state and local governments are able to collect these taxes, governors and legislators throughout the country, including in Illinois, can look to lower taxes in other places as has already been proposed or committed to in a handful of states.

Leveling the playing field will empower businesses to compete and reduce the amount of lost jobs that have rippled across Main Streets throughout the country. I appreciate the action taken in Illinois and I urge Illinois Gov. Pat Quinn and our congressional delegation to continue to press for a federal solution this year.

So much damage has already been done. The time is now for action on the national level.

 

Imran Jooma is executive vice president of Hoffman Estates, Ill.-based Sears Holdings Corp. and president of its online, marketing, pricing and financial services unit. He wrote this for Crain’s Chicago Business magazine, a sister publication of Tire Business.

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