Kentucky retailers want to erase taxation disadvantage

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Column by Tod Griffin, Kentucky Retail Federation

Kentucky retailers aren’t looking for a handout from Washington. They just want a sale made from a smartphone in Henderson or a laptop in Pikeville to be treated the same way as a purchase made at a store in Danville or Frankfort.

Before that can happen, Congress must pass the Marketplace Fairness Act of 2013. The federal legislation would give states the authority to require that out-of-state merchants collect and remit state sales taxes.

The U.S. Senate is poised to vote on the proposal and national support for Marketplace Fairness has grown to include labor and business interests, state and local governments, and retailers of all types and sizes.

In Kentucky, we’ve formed the Kentucky Coalition for Sales Tax Fairness, comprised of local business groups from across the commonwealth to encourage our congressional delegation to support the Marketplace Fairness Act.

Congressional support for the measure also is increasing. The House and Senate versions of the bill have 53 co-sponsors, including  Democrats and Republicans.

It’s important to note this is not a tax issue; it’s a matter of compliance. While no one wants to pay more taxes, the simple fact is a tax should be applied fairly and across the board.

The federal government is giving out-of-state retailers a loophole to avoid collecting the state sales tax. Online and catalog transactions already are subject to the state’s sales and use tax. However, if the retailer is out-of state and doesn’t voluntarily collect the sales tax, the consumer is responsible for remitting the purchase as a use tax on his or her state income tax. Of course, the vast majority of consumers don’t do this because compliance is cumbersome and enforcement is nearly impossible.

For the past decade, online retailers have been using Kentucky retailers as their showrooms. And they have done so without creating Kentucky jobs, spending money in our economy or contributing to local communities.

By giving states the authority to enforce existing tax laws, the Marketplace Fairness Act of 2013 eliminates the 6 to 10 percent competitive advantage enjoyed by many Internet retailers at the expense of local businesses. Closing the loophole also would provide Kentucky more than an estimated $220 million in tax revenue that could be used to shore up budget shortfalls.

We ask our congressional delegation to step up and stand behind Kentucky retailers by cosponsoring and supporting the Marketplace Fairness Act of 2013. Congress must pass this legislation to ensure our tax laws keep up with the modern marketplace.

Tod Griffin is president of the Kentucky Retail Federation and chairman of the Kentucky Coalition for Sales Tax Fairness.