The Supreme Court has taken a sideline seat in the fight between traditional and online retailers. Perhaps ironically, the high court's decision to essentially allow states to pursue online sales tax dollars came on Cyber Monday, the busiest Web shopping day of the year.
At issue is the dispute between bricks-and-mortar businesses that must collect and remit sales taxes to their state coffers, and online enterprises that are supposed to, but do not. Many of the bricks-and-mortar folks believe online retailers have an unfair advantage: Web merchants who aren't charging sales tax can sell their products slightly cheaper. But this isn't simply a matter of competitive business gamesmanship.
The National Conference of State Legislatures estimated that last year, states lost roughly $20 billion in uncollected online sales taxes. As online sales continue to increase - Cyber Monday's take alone is estimated at $1.7 billion in sales, and national figures show double-digit growth in Internet sales annually - the hit to state treasuries is substantial.
In Idaho, an infusion of tax dollars could go far in funding desperately needed work on state highways and bridges. Public education could benefit, as well. So what's the holdup?
Part of it is resistance by big Internet retailers to do the extra work of collecting and remitting taxes while losing a small share of their competitive advantage, but the U.S. House bears responsibility, as well. Some in the House see this as a tax increase - a view we think is inaccurate. In the states that charge sales tax, buyers are supposed to pay what's known as a use tax. It's not a new tax so much as it's one that is illegally being ignored.
Sympathy for online retailers is hard to summon. As Americans grow increasingly attached to and dependent upon their Internet lifelines, the market for online sales will only continue to expand. Customers have convenience and further savings of travel time and gas money to encourage them to shop without leaving their couch. Closing the sales tax loophole won't really hurt anybody, either. It will only level the competitive playing field a little while permitting states to collect what they're owed, which in turn helps them provide services their citizens deem essential.