The introduction of the Internet Sales Tax bill in Colorado a couple of months ago caught most of us in-state with our pants around our ankles. With just two days to prepare, but with tremendous support from David Grogan of the American Booksellers Association, email alerts with sample letters were fired off to Colorado booksellers for them to send to their legislators, booksellers David Bolduc of the Boulder Bookstore, Neil Strandberg of Tattered Cover, and myself (ED of MPIBA) scrambled to do our homework so that we could testify before the House Appropriations Committee. David Bolduc in particular, who is very plugged into the Boulder business scene and local government, hit the streets to talk to everyone he knew on the City Council, Downtown Business Association, Independent Business Allliance (which he founded), and myriad others, rallying them to contact their legislators.
Our relative lack of preparedness was pointed up when it came time for testimony. Testifying in favor of the bill were the three of us plus just one more person, the lobbyist for the Colorado Retail Federation. Signed up to testify against: 73 people from an affililates group, plus one voluble lady decked out in the stars and stripes who was against taxation, period. And while it was GREAT to have the fellow there from the CRF, we had never even met or spoken with him before that day. During the meeting and in the days afterwards, as the amended, greatly watered-down, language for the bill was made public, it became clear that the committee had been very influenced by the sheer numbers of warm bodies who showed up to protest against the bill.
The Committee was actually considering eight or ten proposed bills that day, all of them intended to mitigate the sad condition of the state budget by taxing groups and services which hitherto had been exempt. Natural allies for us, including teachers and school administrators and health care workers, were in the room to testify in favor of another bill that would have funneled more tax money to education, but we had never spoken to them before, either.
Lesson learned: Booksellers in every state should begin NOW to identify and strategize with groups who are our natural allies in the cause of passing Sales Tax laws in every state where sales tax exists. The list is actually quite long and, in addition to bricks and mortar regional and local retailers, including Wal-Mart (yes, they collect and remit sales tax for online sales in all states where it is required), commercial property owners (shopping centers), education, health, and budget advocates, and unions in both the retail and public sector.
A terrific handout was prepared by the California Tax Reform Association and the Northern California Independent Booksellers Association, who have been battling for an Internet Sales Tax law for years. They calculated that not collecting sales tax for online purchases cost California $485 million annually. Then they did the research and came up with a list of programs that could be funded with that much money. Some items on the "We could" list include:
We could fix 300,000 potholes for $15 million.
We could provide music programs to 2000 public schools for $72 million.
We could hire 500 police officers for $45 million
We could give 8,000 senior citizens served by Adult Day Health Care access to two additional days of supervised care for $27 million.
The list goes on and it is very very powerful.
The bill that was ultimately passed by the Colorado legislature was a disappointment but nevertheless was a very important step in the process and provided invaluable lessions for e-fairness advocates to use going forward. As Nancy Colalillo, owner of Tome on the Range bookstore in Las Vegas, NM, reminded me yesterday, e-fairness activism is not just for bricks and mortar retailers and the other groups noted above - every citizen who benefits from sales-tax funded state services such as decent roads, police and fire departments, schools, health services, and more has a vested interest in e-fairness - they just may not realize it!
Lisa D. Knudsen, Executive Director, MPIBA
Why should every bricks and mortar business owner and employee be writing and calling their Governors and state legislators about this issue? Why should all of you be talking to your customers, neighbors, and other bricks and mortar businesses about this issue? Because there are 42 states in this great country of ours that require b&m businesses to collect and pay sales tax, while giving online businesses a free pass. 10 or 15 years ago, when Internet businesses were just getting established, the excuse was that the federal and state governments didn't want to hinder the development of the Internet. WHAT? Did start-up b&m businesses get the same consideration? I don't think so. That position was spurious to begin with and should have been a scandal if more people had been paying attention (not that I was...).
Online businesses from the get-go have had an unfair advantage over bricks and mortar businesses. They have been able to sell their products to consumers for a lower price than b&m owners have because the states basically gave them a free pass on sales tax. And consumers who have taken advantage of the lower prices are also culpable, because they have continued to receive all the state services (roads, schools, fire departments) while avoiding payment of their share of state taxes. The vast majority of MPIBA members are b&m stores but we do have a handful of Internet-only booksellers. Last year one of these members, apparently indifferent to the inequity of the situation, sent me an angry email and quit the Association because he didn't like the position that MPIBA has taken on this issue.
Ok - on to NEXUS. Here is the crux of the issue. Most states' sales tax laws require that online businesses collect sales tax from a customer ONLY IF THE ONLINE BUSINESS HAS "NEXUS", defined as a physical presence in the customer's state. So Amazon, for example, at least theoretically only has to pay sales tax in those states where they have a warehouse or other office. However, in some states' statutes, including Colorado's, the definition of nexus is subject to interpretation, i.e., if the Department of Revenue decides to, it can broaden the definition to include "affiliates", also defined as "representational nexus". When this interpretation of nexus is used, Amazon and many other companies would be required to pay sales tax in virtually all of the 42 states. This was the approach that was successful in New York State last year.
Now I'm pleased to report that Govenor Ritter of Colorado has included projected Internet sales tax revenues in the proposed new budget, and has authorized the Department of Revenue to adopt the broader interpretation of nexus. So while I hope that all of our members in the various states will talk with other b&n business owners and write to their legislators, it is most urgent that Colorado residents act now. Dave Grogan and others at the ABA have prepared a webpage with a template letter for each of the 42 states. Click here to access that information. And keep in touch! Lisa K.
It is with trepidation that one sends out holiday greetings to booksellers, as they are living the retail dream, or nightmare, and may be too exhausted on the actual day of Christmas to do aught but lie abed with cold cloths applied. Nevertheless, dear booksellers, my best wishes have been with you - God Bless! Lisa K.