Small retailer testifies in front of Congress that online sales tax ruling won’t create burden
A small Florida-based retailer who sells both in-store and online told Congress Juiy 24 that last month’s Supreme Court ruling in favor of online sales tax collection will end a price disadvantage suffered by local stores without creating an undue burden for internet sellers.
“BrandsMart is looking forward to the new retail landscape,” BrandsMart U.S.A. Executive Vice President Lary Sinewitz said. “We believe that when we compete on price and good customer service without having to overcome a discriminatory tax burden, we will be far more successful.”
Sinewitz testified on behalf of the National Retail Federation this morning during a House Judiciary Committee hearing on the impact of the Supreme Court’s South Dakota v. Wayfair decision on businesses and consumers.
As an authorized dealer for a variety of major appliance, electronics and furniture brands, Sinewitz said BrandsMart has often been the victim of “showrooming,” where consumers come into the store to take advantage of sales associates’ expertise and see merchandise in person, then order from an out-of-state online competitor to avoid paying 7-8 percent state and local sales tax.
“Sometimes the customer will order the product on the phone right in front of the sales person who has just invested a significant amount of time in educating that customer,” Sinewitz said. “We will often engage in price matching, but our profit margins are slim, and we cannot afford to absorb the cost of the tax.”
BrandsMart began selling online itself several years ago and now sells to customers in the 48 contiguous states. Online sales make up about 5 percent of its business, but the majority of its sales remain in-store.
In Wayfair, the justices upheld a 2016 South Dakota law requiring all online merchants with more than $100,000 in annual sales to state residents or 200 transactions with state residents to collect sales tax. The ruling reversed the court’s 1992 Quill decision that online sellers could only be required to collect in states where they had a physical presence. Under Quill, the court said complicated sales tax laws across the country made it too difficult to know how much to collect otherwise. But NRF and others successfully argued that Quill was outdated because computer software is now available that automatically collects sales tax.
Sinewitz said his 10-store company and smaller members of NRF’s Small Business Retail Council originally thought online sale tax collection might not be viable unless states provided free collection software. After more research, however, he discovered that software is available from several private vendors at affordable prices.
“I feel confident that BrandsMart can quickly come into compliance with whatever collection requirements may be imposed for a modest fee, and that this will give us the ability to also compete and expand our internet sales,” he said. “What once loomed as a potential compliance nightmare now appears to be an incidental cost of doing business.”
Sinewitz said his company is negotiating a contract with a firm that will provide online sales tax collection and remittance services for less than one-tenth of 1 percent of his online sales. Using the requirements of the South Dakota law as a guide on the assumption that it will be copied by other states, the firm was able to calculate the number of states where BrandsMart sells enough to be required to collect. It expects to set up the system within a few weeks and will monitor changes in tax rates and regulations to ensure compliance going forward, he said.