Why Small Business Needs Congress to Close the Online Sales Tax Loophole

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Photo - #efairnessnow supporter.
Courtney at Holdfast Printworks in North Carolina.

In the next few weeks, Congress has the opportunity to fix a tax loophole that’s been hurting small, independent retailers for years.

While big online retailers get out of collecting sales taxes, small, brick-and-mortar stores have to charge customers prices that can be as much as 12 percent higher in some cities. Last year, the Senate passed a bill, the Marketplace Fairness Act, that would finally level the playing field for small businesses, by a bipartisan vote of 69 to 27. But if the House doesn’t act before Congress’s current lame duck session ends, the bill will die, and local business owners and supporters will have to start over.

There’s a fierce debate in the House about whether to take up this issue.  Help us convince Congress to act by joining our campaign for E-Fairness Now.

Almost all small retail businesses are brick-and-mortar stores that are on the losing side of this unfair tax advantage. Of the nation’s 583,000 retail businesses with fewer than 20 employees, 97 percent are physical stores that have to collect sales taxes, according to Census data. These small retailers play a crucial role in our economy, but they’ve been disappearing by the thousands. Many Advocates for Independent Business members who have had to close cite online retailers’ sales tax advantage as one of the leading forces that drove them out of business.

Opponents of the bill say that it would hurt that remaining 3 percent of small retailers who operate online. However, this is untrue. The Marketplace Fairness Act includes an exemption for small sellers with sales of less than $1 million per year. For the few businesses with sales above that threshold, the bill also ensures that compliance will be easy to navigate, by requiring states to provide free collection software.

This is a bill about giving small businesses a fair chance to compete against big online chains, and about modernizing our tax code for a world in which more and more shopping happens online.

In order to act, Congress needs to hear from all of us—by phone, by email, or by Tweet—that it’s time to close the online sales tax loophole. For more information on this issue, check out our backgrounder. And for more ways to take action, including shareable images, look at AIB’s #efairnessnow campaign page.