Congress needs to pass the Marketplace Fairness Act (MFA) so there is real and fair competition reflecting 21st century commerce. America was built on promoting economic growth and business in a fashion that ensures fair competition for all.
Today, online-only retailers are not required to charge and collect sales tax, while local businesses must. However, the sales tax (in all but five states) is still owed. The collection of these taxes is difficult to enforce unless online sellers have either a physical store or a warehouse within the state. When sales tax is not collected at the time of purchase, the burden falls on the consumer to report and pay. Compliance is virtually non-existent. Based on a recent Ohio State University study, states are estimated to lose $23 billion a year from uncollected sales taxes on online goods.
The current sales tax code is unquestionably confusing for consumers and companies. For example, Amazon is now legally required to collect sales tax in 21 states, including the four most populous: California, New York, Florida and Texas. The MFA is not an additive tax. It’s about ensuring all companies, regardless of the type of business, pay the same tax.
The tax disparity puts local businesses at a significant economic disadvantage and stifles the overall economy. According to a July 2013 study conducted by Arthur B. Laffer and Donna Arduin, federal legislation that would allow states to close the online sales tax loopholes would result in a more efficient tax system, a larger tax base, and lower tax rates for all taxpayers. This will increase states’ prosperity and employment, increasing GDP by more than $563 billion and adding more than 1.5 million jobs in the next 10 years. It is time for Congress to grant states the ability to correct the unfair application of sales tax laws.
How does MFA impact our community? Otay Ranch Town Center is a primary shopping destination in South San Diego County. Located just seven miles from the busiest international border crossing in the world, the center serves San Diego County and the Baja region as an economic engine and catalyst for growth. Otay Ranch Town Center contributes more than $14 million annually in property and sales taxes that pay for critical life-safety services, such as law enforcement, fire department, education and other services.
Otay Ranch also employs approximately 2,500 part- and full-time employees. The property has a diverse merchandise mix — including the only Sephora, Apple, Anthropologie and REI in South County. As South County continues to develop, Otay Ranch Town Center’s market share will continue to grow as will our financial contribution to the local economy.
Otay Ranch Town Center provides the community a variety of amenities ranging from a Chula Vista Police storefront, a public library and outdoor gathering spaces. Passage of the MFA allows Otay Ranch Town Center and other bricks-and-mortar retailers to compete fairly against online retailers. Bricks-and-mortar retailers are the economic engine that drives the local economy.
The MFA passed the Senate in early May 2013 and is currently under consideration in the House of Representatives. Passing the MFA is simply about enforcement of current tax law. Whether you shop at a store or online, taxation should be fair.
Henderson is general manager of Otay Ranch Town Center.