A sales tax law whose time is overdue
Sales were beyond brisk on Cyber Monday 2011. Online bargains, free-shipping offers and the bonus of avoiding sales tax added up to a holiday shopping kickoff that shattered records. But one variable in that formula — the no-tax bonus — demands attention.
It gets it in a new law proposed by U.S. Sen. Dick Durbin, a Springfield Democrat. Durbin wants to close a loophole that lets online sellers avoid paying sales taxes in states where they do business but lack a physical presence. Ignore the collective grumble from desk-chair shoppers; there are good reasons for Illinoisans to support this legislation.
As it stands, the U.S. tax code gives an unfair advantage to Internet retailers over local brick-and-mortar businesses. Illinois eased the inequity last March with its so-called “Amazon Tax” law, which charges sales taxes on purchases through Illinois affiliates of larger online companies. But that didn’t entirely end the inequity.
Amazon dropped its Illinois affiliates, and some other online businesses left the state. That response highlighted the need for a more level playing field among all states.
The federal legislation would remove disincentives for online retailers to stay in Illinois. It also would exempt smaller retailers so as not to threaten startups and businesses run out of suburban garages, for instance. As Durbin told the Naperville Area Chamber of Commerce earlier this year, Internet retailers should be held to the “same competitive standard as any business in this town that collects sales tax.”
Avid online shoppers may view the proposal the same way they would a tax increase but the fact is Illinoisans have always been expected pay taxes on online purchases. The state’s “use tax,” which has been around longer than the personal computer, requires Illinois buyers to pay sales tax on purchases from sellers in other states but is especially hard to enforce on online purchases.
Illinois Department of Revenue officials estimate that Internet shopping could have generated $153 million for Illinois last year if online retailers had collected the 6.25 percent sales tax. That number is likely to grow. The best way to obtain the taxes due is at the point of purchase.
The Internet has changed the nature of the way we shop, slicing out an ever-growing piece of the total retail sales pie. To an extent, that is fine and good, but it is needlessly hurting our state at a time when we can least afford it and, just as important, is putting local stores at an unfair disadvantage.
We urge all of our congressional representatives to get on board and enact this legislation, which has bipartisan support. Illinois should be able to collect revenue where its due, and local businesses should not be made to suffer because they have no way to work around an inequitable system.