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CEA, Retail Groups Push Web Tax Reform In D.C.

5/08/2012 12:01:00 AM Eastern

WASHINGTON – The Consumer Electronics Association
(CEA) — along with the International Council
of Shopping Centers and Retail Industry Leaders Association
(RILA) — made their case to the media for
Internet tax reform just prior to CEA’s Digital Patriots’
dinner at a media briefing, here.

CEA’s president/CEO Gary Shapiro and Randy Fry,
chairman of CEA as well as president of Fry’s Electronics,
delivered the same pitch to Congress yesterday
along with many members of CEA’s board.

Shapiro told TWICE that while CEA members include
online retailers and it was “difficult to get to a
position” on the issue, there have been no complaints
by any members since it decided to back the tax. “It is
viewed as inevitable,” Shapiro said.

The proposed bills in Congress have bipartisan
backing “from key Republicans and Democrats. State
governors are behind it, unions are behind it. [The proposed
legislation] will rationalize the tax system.”

Fry explained that for states and local governments,
“sales taxes have dropped 8 to 10 percent” since the
economic downturn, yet sales and profits of online retailers
have skyrocketed.

He gave the perspective from the brick-and-mortar
sales floor. “Consumers come in and match prices
with their smartphones. We have a policy, like others,
to match online prices. Then some will say, ‘Will you
match the online sales tax?’ and they walk.”

Another problem is ignorance of the
law — consumers have to voluntarily pay
sales taxes in the 45 states that there
are laws about it. Fry noted, “Consumers,
and we found out today members of
Congress, are ignorant of the fact that
they owe taxes.”

The legislation is not a tax hike, according
to Fry. “It empowers states to
collect taxes already due.”

Fry cited the case where Amazon has
begun emailing notices to all its Tennessee
customers that they may owe taxes
on past purchases and stems from a law
signed in the state a month ago.

Fry noted that “an amnesty for past
purchases” should be part of the bill
and could be a palatable way for some
members of Congress to vote for such
legislation.

He said that in today’s climate those
who would want to start a brick-andmortar
retail business are at a “6 to 10
percent disadvantage” vs. online retailers.

“Online retailers have enjoyed a 40
percent growth rate … in a down economy,”
he noted, and consumers looking
for a deal of not paying sales tax is part
of the reason for that growth.

That not only hurts brick-and-mortar
retailers but states and local governments
that will either have to cut services
or “raise income taxes, something
that no one wants” to make up the difference,
Fry said.

Betsy Laird, senior staff VP, office of
global public policy for the International
Council of Shopping Centers, said the
chances of passing such a bill during a
presidential election year are “challenging”
but that it has seen “traction on the
issue” and that it may be dealt with during
the lame duck session of Congress
after the November elections.

She noted that 21st century retailing
is “not like it was 20 years ago” when
a U.S. Supreme Court decision set the
mold for the current market and “not like
it will be in 2032.” The proposed legislation
is not one-size-fits-all, since it
has provisions to “do what is right for a
particular state. The concerns of Texas
are different from those in California, for
example.”

Brian Dodge, RILA communications
and state affairs senior VP, said the
House and Senate versions of the bill
aim to “level the playing field” that provides
online retailers with an advantage
over brick-and-mortar competitors.

Dodge noted the proposals will “stop government from picking and choosing
winners” in the marketplace.

Shapiro noted, “Can you imagine, after
the presidential election, no matter
who wins, there will be new appointees
before Congress. They will probably be
asked, as were appointees 20 years
ago, about the ‘nanny tax’ if they paid
Internet sales taxes. If they didn’t, they
will have failed to comply with the law.”

He added that for the CE industry,
the survival of independent retailers that
introduce technology and provide the
“touch and feel” of cutting-edge products
is vital for the industry. “While we
supported the 1992 Supreme Court
decision, we have changed our position”
as e-commerce sales are now estimated
at more than $175 billion in the
U.S. annually.

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