Betty Yee,July 31, 2011,San Francisco Chronicle
Eager to get my hands on the hardbound Vol. 1 of the long-awaited Mark Twain autobiography this year, I purchased it for $34.99, plus tax, from my local bookstore. Sure, I could have paid less online without the $3.32 in sales tax. I chose to support a smaller, independent bookstore, which risks being relegated to serving as the community library for perusing best-sellers, popular offerings and hard-to-find books.
I hope my local bookstore can beat the odds and keep its doors open as it continues to feel the squeeze of online retailers avoiding their fair share of taxes.
The un-level playing field between Main Street retailers and online sellers threatens California jobs, public services and the stability that comes from local businesses having roots in their communities.
California prides itself as a place where entrepreneurs can pursue their dreams. Small businesses have proved over and over their contributions to new jobs and meaningful investments in the communities where they set up shop. However, inconsistent tax laws affect their operations.
For example, most online and discount retailers collect sales tax, accepting their responsibility as California retailers. But, other online retailers – Amazon.com is the largest – claim a loophole to avoid collecting taxes to gain another competitive edge. By refusing to collect sales tax, these Internet retailers charge a lower price on the exact same product sold at local independent businesses in California.
Increasingly, consumers use storefront establishments as showrooms to touch, feel and learn about products, such as my 4-pound, 2 1/2-inch-thick Mark Twain autobiography – which I realized was probably too big to take on vacation after I bought it. Consumers then can go home and buy these products from online retailers who do not collect the tax.
Without e-fairness to ensure the state’s tax laws are applied equally to local storefront businesses and remote online sellers, California stands to lose 18,000 jobs to out-of-state online competitors, according to a study commissioned by Taxpayers Advocate, a San Diego organization that analyzes fiscal and economic issues that affect California. The study was funded by that organization and a group of small and large businesses, including retailers.
This number will double in five years and again in 10 years. This unfair tax avoidance removed an estimated $7 billion fromCalifornia’s economy in 2010, and is projected to increase to $25 billion per year by 2020.
Gov. Jerry Brown signed a law at the end of June to establish e-fairness. Only hours later, Amazon.com severed its ties with local affiliated businesses in a vain effort to retain its unfair advantage. A week later, Amazon.com launched a referendum campaign to preserve its legal loophole, a clear demonstration it is willing to do anything to avoid complying with the law, no matter the cost to California’s mall businesses and jobs. So much for Amazon.com’s ethics code and its emphasis on compliance with every law.
The absence of e-fairness results in $1.2 billion in uncollected taxes annually, according to one study, further exacerbating state and local budget problems. These taxes fund essential public services: $1.2 billion could save the jobs of more than 16,000 teachers, 15,000 nurses or 15,000 police officers in communities throughout California.
Communities with high-quality schools, healthy residents and safe neighborhoods are more likely to thrive, driving local economies. When Main Street establishments are forced out of business, local communities cease to be vibrant and attractive to new residents and businesses.
Remote online sellers are consciously deciding not to invest in the communities where theirCaliforniacustomers reside. Amazon.com led the charge among online retailers to discard local marketing partners, known as “affiliates,” in order to avoid the new law – essentially dumping the California-based affiliates it used to attract sales. Nothing required severing ties with these businesses. The only requirement was to collect sales taxes on the same terms as in-state retail competitors.
Amazon.com and others resisting e-fairness are using these local affiliates as hostages, seeking to pit one set of local businesses against others, hoping they can scare Californians into retaining an unfair tax law. The fact is, many in-state retailers, such as Sears, Best Buy and Barnes & Noble, have invited former Amazon.com affiliates to join their online networks, knowing that these online affiliate entrepreneurs can succeed in an e-fairness environment.
Amazon.com’s alternative – allowing e-retailers to undercut our local retail establishments by fighting to retain an unfair loophole – is blatantly unfair, hijacks California consumer dollars to other states and threatens the future economic vitality and health of local communities.
Speaking of Mark Twain, let us be reminded that he said, “Clothes make the man. Naked people have little or no influence on society.” The naked truth is that no business should hide under the cloak of a legal loophole to compete unfairly.