Main Street store owners know the scene all too well. A customer comes in, thoughtfully compares the selections, asks questions, then … walks out.
You know where that customer is headed. To a computer where he or she can avoid paying sales tax.
It happens so often it has a name. It’s called “showrooming.”
The tax loophole was carved out by a U.S. Supreme Court ruling in 1992, when the Internet was in its infancy.
The playing field should have been leveled long ago between local retailers who support their hometowns by paying taxes and online retailers who can take advantage of a tax loophole.
Finally, it looks as though that day may have arrived. The U.S. Senate voted 74-20 this week to take up the Marketplace Fairness Act, with Sens. Deb Fischer and Mike Johanns voting in favor.
Fischer and Johanns should follow through by voting to pass the measure, and their colleagues in the House should follow their lead.
As Jim Otto, president of the Nebraska Retail Federation, put it in a Local View in the Journal Star last year, “By closing the loophole, lawmakers may be able to use that additional revenue to cut tax rates for all Nebraska businesses and families.”
He added that allowing local retailers to compete means they “will continue to sponsor local youth sports teams, contribute to community activities, and create more jobs and opportunities across Nebraska.”
The Nebraska Department of Revenue estimates that the state loses about $37 million and local governments lose another $8 million a year because of the loophole. Lincoln’s loss is estimated at $1.3 million a year.
In order to restore fairness to the marketplace, Nebraska’s congressional delegates will have to stiffen their spines against the strong-arm tactics employed by such anti-tax zealots as Grover Norquist, who once told a Lincoln audience he wanted to starve the federal government until it was so small he could drown it in the bathtub.
A wiser perspective came from Republican Sen. Lamar Alexander of Tennessee, who argued that conservatives should close the loophole because it puts the government in the business of picking winners and losers.
The bill softens the hassle it will create for small online retailers by exempting those with less than $1 million in revenue, requiring state governments to provide free software to calculate taxes, and establishing a single entity to collect taxes, so the retailers don’t have to send them to individual counties and cities.
It’s time for Nebraska’s congressional delegates to insist on fairness in business. If they vote against the measure, they’ll be just like “showrooming” customers, turning their backs and walking out on local Main Street businesses from one end of the state to the other.
Lincoln (Neb.) Journal Star