For proponents, an online sales tax would “level the playing field” for brick-and-mortar businesses.
This emerges as one justification for proposed legislation that allows Missouri to tax retail sales that occur online, even if the seller does not have a physical presence in Missouri.
Local businesses could use some help as online commerce claims a bigger share of the retail pie. In 2020, online sales accounted for $969.4 billion of the $4 trillion in U.S. retail sales, according to the National Retail Federation. Internet-based sales are expected to grow 20% in 2021, compared to 8% for in-store sales.
With this trend in mind, lawmakers in Missouri are close to passing a measure that would allow a tax on more online commerce, following a U.S. Supreme Court ruling that enables it. Opponents, however, raise one important issue as Missouri moves down this path. What if it doesn’t help?
One letter writer, Larry Haataja of Maryville, made a good observation when he wrote: “Have you ever heard anyone say they bought something online because of the taxes they saved?”
There is research that backs up his skepticism. A survey from Nielsen Norman Group found that ease of placing an order was the No. 1 reason for shopping online, followed by a large selection of products and cheaper prices. Survey respondents also expressed a liking for the lack of sales pressure in the online marketplace.
Perhaps this is really an issue of semantics. As a matter of tax fairness, online retailers should pay the same tax as brick-and-mortar stores. In St. Joseph, a Downtown boutique shouldn’t pay more than a jewelry maker in California or an out-of-state company with a robust e-commerce presence.
In terms of competitive advantage, an online tax might not level the playing field as much as supporters claim. We still think this is a direction that Missouri needs to move toward, especially since legislation in Jefferson City is coupled with individual income tax relief because it aligns tax policy with the way the people spend their money. The day will come when a similar decision will need to be made with the gasoline tax and highway funding.
But with retail sales, it will be hard to put the genie back into the bottle, especially after the way the coronavirus pandemic accelerated the preference for buying online. Supporters of an online tax should remember one maxim of business.
Don’t overpromise and underdeliver. Even with a more level playing field, it’s still an uphill battle for our local merchants. The only thing that fixes it is a time machine, and that isn’t yet sold on Amazon.