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

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 on Wednesday evening at a media briefing.

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-and-mortar 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.