Marketplace Fairness Act Levels The Playing Field For Illinoisâ€™ Small Businesses
By: Elliot Richardson, SBAC CEO & Past President
David Davis, the owner of Davis Audio & Video, is generally reserved when talking about political issues that impact his successful, family-owned small business. However, when David talks about how difficult it is to compete with large on-line retailers, whose customers do not pay sales tax, he becomes passionate. David explains that â€œit is becoming increasingly more difficult for us to compete with large internet companies whose customers can avoid paying sales taxes. Local businesses cannot be expected to compete when the price of our products is inflated by a sales tax internet companies do not pay.â€
We must level the playing field for local businesses to ensure they can survive, and thrive, in this changing economic environment. For that reason, the Small Business Advocacy Council strongly supports the Market Place Fairness Act. This bi-partisan legislation, introduced by Senators Mike Enzi (R-WY), Lamar Alexander (R-TN) and Dick Durbin (D-IL) will allow our local businesses to compete with larger companies, outside Illinois, whose customers are not burdened with the Illinois sales tax. Moreover, this legislation will raise approximately a billion dollars in revenue for Illinois without raising taxes. That revenue would be extremely valuable to Illinois, which struggles with fiscal concerns that include rising taxes and underfunded government programs.
The Marketplace Fairness Act will grant states the authority to compel online and catalog retailers, who gross more than $500,000 in internet sales, to collect sales tax at the time of a transaction. The Act will ensure that local Illinois businesses, who must collect sales tax from their customers, to compete with large on-line retailers. Local business owners will no longer lose prospective customers to internet companies, located outside Illinois, who do not collect these taxes. No longer will our local businesses hear this dreaded passage: It is cheaper to buy it on-line because I do not have to pay taxes.
As the system stands now, it is left up to consumers to pay taxes on their online purchases. However, many folks do not pay these taxes because reporting on-line purchases is a cumbersome process and nearly impossible for states to enforce. Naturally, the result is that our local small businesses are at a competitive disadvantage to online retailers as significant internet sales taxes go uncollected.
Congressional action must be taken before states can require on-line companies to collect and report sales taxes. Once the Market Place Fairness Act is passed, states will be required to simplify their sales tax laws before collecting these taxes. The simplification of these laws will eliminate confusion and make compliance significantly easier for large on-line retailers. Given that Illinois could receive an additional $1 billion in revenue from actually collecting its sales tax from on-line retailers, a small portion of this money could certainly be allocated to working with large on-line companies to ensure they fully understand the law.
As Illinois struggles with significant debt, a pension crisis and other fiscal problems, we cannot miss this opportunity not only to level the playing field for small businesses, but to generate badly needed revenue for the State. Business organizations, including the SBAC, have formed a coalition focused on passing this important legislation because only the free market only works when it is also a fair market.