Closing Online Sales Tax Loophole Could Add Billions in GDP
and Thousands of Jobs in Alabama, Study Shows
MONTGOMERY – Alabama’s hometown, Main Street, mom-and-pop, small retailers have one wish this holiday season: That the U.S. Congress closes the online sales tax loophole.
The Alabama Retail Association predicts Alabamians will make $8.9 billion in taxed purchases in November and December. Consumers in our state probably will spend as much as another $712 million this holiday season with out-of-state, online-only retailers who don’t collect sales taxes, based on 2012 research done by professors at the University of Alabama at Birmingham’s Collat School of Business.
All local businesses are required to collect and remit sales taxes from customers, while many online retailers are not. The current federal policy gives certain remote sellers as much as a 10 percent pricing advantage over local Alabama employers. Without Congressional action, mega, online-only competitors with no connection to the communities of the Alabama customers to whom they sell will continue to benefit from this unfair sales tax collection policy to the detriment of neighborhood shops.
“Alabama retailers are in the midst of a holiday shopping season, which we expect to show at least a two-percent growth,” said Alabama Retail Association President Rick Brown. “Yet millions more will be spent by our citizens that will not benefit the state of Alabama nor its retailers. It is past time for Congress to address e-fairness and end the online sales tax loophole before another holiday shopping period rolls around.”
Progress has been made this year toward that goal. In May, the U.S. Senate, including Alabama’s senators Richard Shelby and Jeff Sessions, approved the Marketplace Fairness Act, which would level the playing field in regard to sales tax collection for most retailers. In September, the House Judiciary Committee, including a subcommittee led by Alabama’s 6th District Congressman Spencer Bachus, released its principles for remote sales tax collection.
Alabama Retail members, who have been on the forefront of this debate for years and have communicated their support for e-fairness at every step in the process, now call on Congress to take swift action by drafting legislation based on these principles and passing the bill in the U.S. House of Representatives.
E-FAIRNESS COULD MEAN $6.8 BILLION and 21,732 JOBS
Earlier this year, President Ronald Reagan’s economist Art Laffer released a report that said the potential economic growth in Alabama by 2022 if the Marketplace Fairness Act passes would be $6.8 billion in additional GDP and 21,732 new jobs. The 2012 study by Robert Robicheaux, Ph.D., chair of the Department of Marketing, Industrial Distribution and Economics in the Collat School of Business at UAB, said Alabama loses $2 billion in taxable sales to out-of-state online retailers each year, resulting in the loss of as many as 4,000 jobs annually. Alabama needs Congress to pass the Marketplace Fairness Act as soon as possible to give states the ability to collect these taxes online.
Alabama Retail members also ask Alabamians who shop online for holiday gifts to patronize retailers who include the tax with their sales. If a retailer fails to add the tax to your online purchase, the appropriate sales tax is still owed to your state and local governments. Under Alabama law that has existed since 1939, Alabama consumers are required to make a note of their untaxed purchases on their state income tax returns at the end of the year.
The Alabama Retail Association represents retailers, the largest private employer in the state of Alabama, before the Alabama Legislature and the U.S. Congress. Our 4,000 independent merchant and national company members sell food, clothing, furniture and other general merchandise at more than 6,000 locations throughout Alabama. Alabama Retail promotes what is best for the retailing industry in Alabama and has been doing so since 1943. From legislation to education, through communication and member services, Alabama Retail members benefit from the value of membership in their association. Retail works!