Carol Behr thinks she knows why many students at Southern Illinois University Carbondale are buying their books online, and it's not just the convenience.
It's the sales tax savings, says Behr, a vice president of Kennedy Book Store, which owns Southern Illinois Book & Supply in Carbondale. The company also has a store in Lexington, Ky., and of the two, she says the Carbondale store has lost more business to competitors such as Amazon.com.
The difference? Kentucky doesn't charge sales tax on textbooks, but Illinois does.
To Behr, the slipping Illinois sales figures highlight an unfair competitive situation. "A business is a business," she says. "Why do I have to charge sales tax and they don't, if we're in the same business?"
Ten senators, including Illinois Democrat Richard Durbin and Missouri Republican Roy Blunt, introduced a bill Wednesday that would remove Amazon's competitive advantage over bookstores such as the one in Carbondale. And, surprisingly, Amazon has endorsed the bill.
The proposed Marketplace Fairness Act would require retailers to collect taxes on remote sales, including those made online or through mail order. It would apply only to businesses with at least $500,000 of remote sales, and only in states that adopt a simplified sales tax structure.
Large sums of money are at stake. William Fox, a professor of economics at the University of Tennessee, estimates that state and local governments lose $11.4 billion a year in revenue from online retail sales, and a total of $23.6 billion from untaxed online, catalog and business-to-business sales.
In the past, Amazon has fought hard to avoid collecting its share of that money. In Illinois, North Carolina and Rhode Island, it canceled relationships with local affiliates to get around so-called "Amazon tax" laws. In Texas, it threatened to close a warehouse rather than pay $269 million in sales taxes.
Now, though, Amazon says it 'strongly supports enactment" of the Marketplace Fairness Act. Not all companies agree: eBay, for example, says the bill "fails to protect small business retailers using the Internet."
Past congressional efforts to address the sales tax issue — including an earlier Durbin bill — have gone nowhere, but Amazon's endorsement could change things. States' financial straits may lend some urgency, too.
This could also be framed as a jobs bill. Fox says that an online retailer such as Amazon hires one worker for each million dollars in sales, while a big retailer such as Walmart would hire five people. "The concern is the tax treatment might be sending people to buy online and reducing employment," he says. Research seems to confirm Behr's hunch that taxes affect the competitive balance between online and bricks-and-mortar retailers. A couple of studies, Fox says, have found that people in higher-tax jurisdictions are more likely to shop online.
Opponents emphasize the compliance burden of collecting sales taxes for some 7,500 taxing jurisdictions. That's not as big an obstacle as it seems, however: The online arms of Target and Walmart already collect taxes in all those places, and the software they use is available to other e-tailers.
This debate, it should be emphasized, is not about raising taxes. The taxes are already owed, but states have no realistic way of collecting them from individual shoppers. As a matter of fairness, if Southern Illinois Book & Supply is required to be a tax collector, then Amazon and eBay should be, too.