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There's Nothing 'Fair' About the Internet Sales Tax

05/08/2013 10:23 am ET | Updated Jul 08, 2013
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Just over two years ago I wrote a columnin this space which charged that giant retailers like Wal-Mart and Target were using mom and pop stores as human shields in their battle against Amazon.com over taxing online sales.

Powerful real estate investment trusts along with big box stores have convinced many in Congress that consumers should pay a sales tax on Internet purchases. It's being done in the name of the small merchant -- the ones that were dispatched to an early grave by the likes of Wal-Mart.

The group spearheading the lobbying for the internet sales tax calls itself the "Alliance for Main Street Fairness." They are not located on Main Street, and what they want is not fair. These corporations are the ones who picked dry the bones of Main Street businesses for the past 50 years. One Wal-Mart official complained to the Wall Street Journal, "The rules today don't allow brick-and-mortar retailers to compete evenly with online retailers, and that needs to be addressed." Wal-Mart crying about fair competition?

This Alliance recently staged a "fly-in" to Washington, D.C. "to speak to their Members of Congress about the importance of passing something called "e-fairness." It was worth every drop of jet fuel, as the Senate caved in and passed the "Marketplace Fairness Act."

Ironically, the Alliance is being challenged by some conservatives in the U.S. House who see an internet sales tax as a new tax. In response, the Barons of Main Street have paraded out figurehead conservatives like Congressman Paul Ryan (R-WI) who is quoted as saying of the internet sales tax: "It's only fair that the local brick-and-mortar retailer be treated the same as the big-box online sales company out of state."

I have never seen a "big box online sales company" because there is no such thing. Companies like Amazon do have huge warehouses -- the same kind that Wal-Mart has -- but Amazon and eBay don't have big box stores sprawling along our highways, attracting tens of thousands of cars every day -- crime magnets and exhaust corridors.

Here is why a sales tax on internet sales is not fair:

1. The sales tax is regressive, and imposing it on internet sales hurts low income people the most, rich people the least.
2. Bricks and mortar big boxes impose an enormous cost on taxpayers in the form of public safety expenses -- like added police and fire protection -- environmental damage (google: "heat islands"), infrastructure costs (water, sewage, roads), etc.
3. Raising the bottom line cost of an internet sale is a perverse incentive, because as a society, we pay a lower transaction cost when people stay off the road and avoid another gas junket to the mall.

We should give virtual retailers an "advantage" because they do not tax our public support costs like the big box stores do. We should be creating incentives for consumers to shop local and shop online for this very reason.

The Alliance claims it represents "florists and independent bookstores... electronics stores and art galleries." I am not moved by the argument that local bookstores or florists are being killed by online retailers. The truth is, big box stores got to that graveside first. And nobody goes to Wal-Mart to buy art -- not even the Elvis on Velvet crowd.

If you want to help smaller merchants, give them an income tax break or more generous deductions on their taxes. Lower their cost of doing business. Encourage shoppers to visit smaller stores by lowering the sales tax at establishments with less than $1 million in annual sales, and make up the lost revenues by raising the sales tax at retailers with sales greater than $10 million. Make the sales tax more progressive at the point of sale. That would help level the field for a small clothing store that can't buy 1 million shirts from Bangladesh like Wal-Mart can.

We need to drop the fig leaf of 'fairness' and realize that taxation in this country has never been about fairness. It's all about corporate power and money. Our tax system favors the rich -- so Congress responds by raising the one tax which hurts the poor the most.

"We are not advocating for a new tax," the Alliance says. "Instead, we are advocating for states to be able to enforce their current sales tax laws on every business selling in their state." Even if you can't find an eBay store or an Amazon store in your state, the Alliance wants you to pay taxes just like you do at the big box store that steals local jobs and runs up a huge police and fire tab in your hometown budget every year.

Let's reward people who shop online. Let's create incentives for consumers to shop local. And let's make the big boxes see what it's like to be disadvantaged.

Ask yourself this: If Wal-Mart has become the champion of Fairness, then who is watching over the gates of Hell?

Al Norman is the founder of Sprawl-Busters. He has been helping communities fight big box stores for the past 20 years. His latest book is "Occupy Walmart."