Why Naperville wants online sellers to charge sales tax
Naperville enacted a home-rule sales tax that will be charged for the first time Jan. 1, but the city isn't done taking stands on tax issues yet.
The council came out in favor of a broader-reaching piece of tax legislation that could affect online retailers and bring in more tax revenue for the city: the Marketplace Fairness Act.
The federal bill would allow states to require Internet and catalog businesses with more than $1 million in sales each year to charge sales taxes when customers make purchases. Now, states can only require that for companies with a physical presence inside their borders. With a resolution approved unanimously Tuesday night, the measure has Naperville's support.
Becky Anderson, a city council member and co-owner of the Anderson's Bookshop chain in the Western suburbs, pushed for the council to voice its support of the act. She read the entire resolution into the record during Tuesday's council meeting, emphasizing the positive effects the act could have in leveling competition between online and physical stores.
"The city of Naperville believes the Marketplace Fairness Act is important to enable local brick-and-mortar retailers to remain competitive," Anderson said, reading from the conclusion of the nonbinding resolution. "The proposed Marketplace Fairness Act provides states and local governments with the flexibility to address uneven taxation in the marketplace creating a disadvantage for local brick-and-mortar businesses."
Mayor Steve Chirico agreed it's a matter of equality.
"To be fair, all the businesses need to be treated the same way," he said.
Chirico said he understands why the government was hesitant to regulate taxes on Internet sales when online shopping was a new phenomenon. But now it's established practice. And so is the ability to charge the appropriate state and local taxes on purchases made throughout the nation.
"It's not a matter of technology now," Chirico said. "It's a very simple function."
When council members in September approved a 0.5 percent sales tax to be charged on purchases excluding cars, groceries, restaurant food and drinks and medications beginning Jan. 1, some said the tax would be more effective if online sellers were required to charge it, too.
The tax is expected to bring in $8.5 million a year, but the projection decreases to $6.4 million for 2016 because it will take three months for the city to collect any revenue from taxes paid. If online sales were taxed as well, those projections could increase.
Internet sales tax has been an issue for Anderson and Naperville business owners since 2012, when U.S. Sen. Dick Durbin visited Anderson's Naperville location to voice his support for a version of the bill being considered then. At the time, he said support for the measure was growing was growing, but it was not enacted.
While Naperville's resolution doesn't change any policy, Chirico said it can be a helpful bargaining tool for the U.S. Congress members and senators who represent the city because it shows local support from constituents.