End Internet's unfair edge on Main Street
Downtown business leaders support leveling measure on sales-tax collections
Carroll merchants say they want nothing more than a level playing when competing with online companies.
Carroll clothier Wade Wilkie says local merchants deserve a level playing field in which Internet shoppers are mandated to pay sales taxes.
Daily Times Herald photos by Jeff Storjohann
When customers shop at stores in Carroll they pay a 7 percent sales tax (6 percent state and 1 percent local-option). But at many online outlets there is no such tax, and not all Iowans are paying the now voluntary “consumer’s use” tax on online purchases not taxed at the point of sales during their Internet click shopping.
U.S. Sen. Tom Harkin, D-Iowa, told the Daily Times Herald during a conference call with media on Thursday, that he supports a federal law requiring online businesses to pay state sales taxes — if the states choose to collect them. Gov. Terry Branstad has said he supports the measure as well.
“I agree one-thousand percent,” said Wade Wilkie, proprietor of Wilkie Clothiers, 125 W. Fifth St. “It puts us on more of a level playing field.”
Harkin said he has been in favor of requiring Internet sales taxes for years. The situation as it stands now “does provide an unfair advantage for those Internet sales,” Harkin said.
The veteran legislator says he spies an opening in current negotiations over major spending and program decisions now under way in Washington, D.C.
“Hopefully, it will be part of this grand bargain as we do taxes that we can put that in,” Harkin said. “We should have done it a long time ago. I’m just sorry we haven’t done it by now.”
The taxes collected at local businesses go toward a number of state, county and city projects, from funding of schools to the completion of roads and streets. Wilkie doesn’t believe most customers think about this when they click to sales with online providers.
“I don’t think they care to be quite honest with you,” Wilkie said. “They look at the bottom dollars. We’re in such a ‘me’ society. People are looking out for themselves.”
Lou Billmeier, proprietor of Billmeiers Clothing, 513 N. Adams St., said all online sales transactions should be taxed.
“Why would one way of retail, whether it be the Internet, not be subject to tax,” Billmeier said.
He would like to see the government make the sales tax more fair for traditional brick-and-mortar businesses.
“I don’t know how we’re going to control it, but they need to come up with something,” Billmeier said.
Currently, Internet sales are subject to sales taxes in Iowa, even if they are purchased from out-of-state sellers. Businesses with Iowa presences are supposed to collect the taxes with the sales.
According to Kay Arvidson, assistant public information director for the Iowa Department of Revenue, many taxpayers are not aware Iowa has a 6 percent consumer’s use tax. Consumer’s use tax normally applies to items purchased outside Iowa and brought in or delivered into Iowa through such means as online purchases, mail-order catalogs and television shopping programs. The Department of Revenue has online forms at its website, www.iowa.gov/tax, to assist people in paying in what Arvidson described as a voluntary tax.
In fiscal year 2012, Iowa businesses and individuals paid $64.4 million to the state through the voluntary consumer’s use tax.
The consumer’s use tax applies only to the state’s 6 percent sales tax. Local-option sales taxes are not covered under it so even people buying online and paying the tax would still get a 1 percent break compared with a purchase made at a store in Carroll.
Businessweek reported that spending per shopper nationwide averaged $423 — $25 more than last year — from Thursday to Sunday, while total spending increased nearly 13 percent, to an estimated $59.1 billion, according to a survey by the National Retail Federation.
According to ABC News, online sales on Thanksgiving Day, traditionally not a popular day for online shopping, rose 32 percent from last year to $633 million. And online sales on Black Friday were up 26 percent from the same day last year, to $1.042 billion. It was the first time online sales on Black Friday surpassed $1 billion, ABC News reported. Early estimates of Cyber Monday, the biggest online shopping day of the year, showed sales may reach $2 billion and a growing portion of that may come from the pockets of a record number of mobile shoppers, ABC reported.
The Wall Street Journal recently reported that Amazon.com has agreed to collect a sales tax on items sold in Nevada beginning in 2014, or earlier should proposed federal legislation of the sort Harkin supports mandate that online retailers collect sales taxes.
In Iowa, the consumer’s use tax was established in 1937, three years after the sales tax was enacted, to create a fair playing field for Iowa businesses, according to The Iowa Department of Revenue. The rate of the consumer’s use tax is always equal to the state sales-tax rate.
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