Would an Online Sales Tax Help Urbandale Businesses?

Traditional retailers in Urbandale have mixed views on a federal law that would create a sales tax for online purchases.

Some feel the Marketplace Fairness Act, which is a bill in the U.S. Senate that would require a sales tax for online purchases, would level the playing field between brick and mortar business and online retailers, while others say it will overburden small businesses with tax collection responsibilities.

"The problem with selling all over the country is you would have to have some listing to know what taxes in any jurisdiction are applicable," said David Carlson, who owns Superior Printing & Promotions. "It would be a paperwork nightmare as far as I'm concerned."

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Others see only benefits.

"I'm all for it," said Deck the Walls owner Tim McCann. "It levels the playing field. A lot of online retailers don't have overhead that brick and mortar stores do, and then if they don't have to pay sales tax - once again - that is unfiar. We are all using services the state provides. If online retailers aren't charging that, they have an unfair advantage over those that work the community, live in the community and pay taxes in the community."

The Urbandale Chamber of Commerce hasn't taken a position, and didn't return phone or email messages seeking comment.

The Marketplace Fairness Act would require businesses with more than $1 million in annual Internet or catalog revenue to collect sales tax for online purchases and send them to the state where the buyer resides. A Huffington Post report cites a National Conference of State Legislatures estimate that states collectively lost $23.3 billion in sales tax revenue in 2012 due to online sales.

U.S. Senate could vote on the bill, which has bi-partisan support and the blessing of President Obama, this week.

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Supporters say the bill would help retailers battle a practice called showrooming, when shoppers survey a store's goods and then buy it from an online competitor. Ad Week cites Placed and Gartner research that 60 percent of customers use traditional retailers to examine items they intend to buy online.

Opponents say it would harm small business by making them tax collectors and "put them in a position of having to purchase software to calculate sales taxes, according to the Huffington Post report.

A University of Iowa marketing professor called the bill a mixed bag.

Overall, it should be an equalizer for traditional retailers, but tax collection can be complicated and may require added costs to execute, which could overburden small businesses that are already stretched thin, said Gary Russell, Henry B. Tippie Research Professor of Marketing.

"I think it is probably inevitable in some form, because lack of taxation you could argue does give online firms an unfair advantage," Russell said. "But, if this passes does this solve all the problems that online firms present? No, it doesn't."

Deck the Walls has been in business since 1987 and McCann said it has lost business to online competition, although not as bad as some retailers. Specialty framing hasn't been affected, but art merchandise has taken a hit, he said.

Online sales now accounts for 16 percent (and climbing) of all retail, up from 2 percent in 2000, according to a Federal Reserve Economic Data report.

Superior Printing has been in business since 1986, and Carlson said he has both online and in store sales. He said he'd have to hire another staff member to handle the responsibilities of tax collecting.

"I think the other side far out weighs that side," Carlson said of the negative aspects of the bill over ruling the positives.