Area businesses hopeful for Internet sales tax
CRYSTAL LAKE – It happens time and time again.
Customers step into Play It Again Sports and seem interested enough. They grip baseball bats, squeeze gloves, try on equipment and search for their size.
And then, just as they’ve found that perfect fit and it’s time to head to the cash register, the transaction falls apart.
“They’ll literally come in with their parents and say after we’ve helped them, ‘OK, let’s go check the prices online,’ ” said Bob Ruer, owner of the Crystal Lake seller of new and used sports equipment. “It’s extremely frustrating.”
The phenomenon known by some as “showrooming” is one major reason why many business owners such as Ruer are eagerly awaiting proposed new legislation that would force Internet retailers to collect sales tax at the buyer’s local rate. For years, Ruer and other owners of brick-and-mortar businesses have felt they’re at a competitive disadvantage.
“Even if I’m the same price, I have a 7.3 percent price [increase] when I have to charge sales tax,” Ruer said.
This week, the U.S. Senate began considering what lawmakers have named the Marketplace Fairness Act, which has been pushed hard by Sen. Dick Durbin, D-Ill.
As it stands, it’s up to buyers to make sure they end up paying sales tax on purchases made online. Individuals are supposed to note the sales tax they owe from Internet purchases on their state income-tax return.
But only 5 percent of Illinois residents fill out that line, Durbin said.
The proposed legislation would put the initial costs on the states to provide retailers with the appropriate software to collect taxes. Internet retailers with less than $1 million in annual sales would be granted an exemption.
Opponents of the bill, including large online retailers such as eBay and Overstock.com, have taken issue with the $1 million exemption and suggested it should be bumped higher. The online auction service is in a unique circumstance, as it supports retailers of all sizes.
EBay and others also have argued the proposed legislation asks too much of Internet sites.
“Are you prepared to collect sales taxes in the more than 9,600 tax jurisdictions across the U.S.?” wrote eBay President and CEO John Donahoe in a recent email to users of the site. “Are you prepared for the potential to be audited by out-of-state tax collectors? These burdens would be the result of proposed legislation.”
The bill has the support of big-box stores such as Walmart, Best Buy and Target.
Even Amazon – which has been preparing for same-day shipping by setting up physical warehouses across the country that require them to collect sales tax anyway – has come out in support of the bill.
Gov. Pat Quinn noted the bill would allow the state to collect an additional $200 million a year in sales tax when writing in support to federal lawmakers.
Meanwhile, Ruer said he’s been waiting with “bated breath” for the legislation to pass.
And he’s not alone.
Cari Setzler, manager of The Running Depot in Crystal Lake, said she’s similarly seen customers trying out the store’s products only to eventually leave, presumably to buy online.
Setzler said the store started offering free running and walking analysis with a purchase of shoes to slow the trend. But Setzler and Running Depot owner Pam Andrews still are awaiting an Internet sales tax.
“I think it would definitely help to level the playing field,” Setzler said. “Because when somebody is coming to us on price basis solely, there’s nothing we can really do.”