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2011-04-08
Little Rock,AR. Wal-Mart Masquerades As Defender of Main Street

On March 31, 2011, the Arkansas General Assembly passed legislation called the "Main Street Fairness Act," which would force online retailers to charge customers a sales tax.

The legislation was described in the Arkansas media as "closing a massive loophole" in tax law, and leveling the field for bricks-and-mortar stores. It is not surprising that Arkansas lawmakers passed this bill, given the fact that one of its biggest boosters across the country is an Arkansas-based company that has been killing Main Street businesses for nearly half a century: Wal-Mart.

Although the media likes to push forward the small, independent bookstore to comment on laws like this, the major power behind the Main Street Fairness Act is nowhere near Main Street. According to a March 17, 2011 Wall Street Journal article, "Wal-Mart Stores Inc., Target Corp. and other large retailers are ratcheting up a political campaign to force Amazon.com Inc. to collect sales taxes, sensing opportunity in the budget crises gripping statehouses nationwide." The article fingers these big-box stores as the money behind the Alliance for Main Street Fairness, which is pushing the online sales tax bill in a number of states this year. One Wal-Mart official told the Wall Street Journal, "The rules today don't allow brick-and-mortar retailers to compete evenly with online retailers, and that needs to be addressed."

One state senator in Arkansas said the Assembly's new tax legislation "doesn't create any new taxes, it ensures that sales taxes already due are collected fairly and in a more efficient way. It will give consumers the peace of mind that they aren't going to be liable for paying sales taxes after making online purchases, as they are now." But most online shoppers have no idea they are supposed to pay sales tax on their purchases, and there is no enforcement mechanism to catch them. The Arkansas bill stipulates that once an out-of-state online retailer reaches a certain "nexus" -- whether a physical or 'affiliate' presence -- it has to collect sales taxes on purchased made to people in Arkansas.

Three weeks before Arkansas passed its "fairness" legislation, a similar bill was signed into law in Illinois. Wal-Mart issued a press release shortly after the law was signed which said, "Gov. {Pat] Quinn has once again demonstrated he is willing to do what is right for Illinois and its businesses. During these economic times, it is vital for the state of Illinois to collect the millions of dollars of unpaid sales tax while allowing it to level the playing field for brick and mortar businesses who support our local Illinois communities." Wal-Mart went on to pledge that it would "continue to collect and remit all sales taxes due on all Walmart.com sales to alleviate all regulatory burdens from its customers."

National legislation with a similar name has been filed in Congress since the summer of 2010. The national Main Street Fairness Act would allow states to mandate that large internet and mail-order retailers collect state and local sales taxes. But first states would have to pass the Streamlined Sales and Use Tax Agreement (SSUTA ), which establishes certain standard benchmarks for product definitions, uniform requirements for filing sales tax returns, and a centralized registration process. 24 states have adopted SSUTA. The Main Street Fairness Act would waive these requirements for small online retailers and catalgue companies.

Most of these state and national lobbying efforts are not being driven by the small mom and pop retailers which are dangling on a thin profit margin. Ironically, the national chain stores, which helped drive many of these small retailers to an early grave, are now taking up a cause invoking the name of the Main Street they helped destroy.

If the legislation were called the "Big Box Fairness Act," no lawmaker would lift a finger to support its wealthy backers. Big Box stores understand the importance of proper packaging. They also have learned that retailing and politics are both about salesmanship.

The Massachusetts Main Street Fairness Coalition is a perfect example of political packaging. The Coalition says that "whether a sale is made online or at a little store in Faneuil Hall, a sale is made, a transaction has occurred and the sales tax is owed. The same rules should apply online that apply on Main Street. It is a simple matter of fairness. Our local small businesses operate at a significant 6.25% price disadvantage to out-of-state, online businesses, leading to fewer sales at brick-and-mortar establishments who contribute so much to our community."

Lawmakers in Massachusetts -- as elsewhere -- are struggling to expand exising revenue streams, and the sales tax is seen as an opportunity to replenish depleted state revenues. But the businesses pushing for the Fairness bill are not the 'little store' crowd, but companies like Wal-Mart, trying to inflict as deep a wound as possible against retailers like Amazon.com.

It turns out that the "local small businesses" in the Massachusetts Coalition are powerful lobbying groups like the Retailers Association of Massachusetts (RAM), which recently supported an effort (unsuccessful) to lower the state's sales tax, and lobbied hard for sales tax holidays -- which cost the state tens of millions in lost revenue. RAM admits its membership includes "large national retail chains."

On the national level, the Main Street Fairness Act is being promoted by the International Council of Shopping Centers, the National Retail Federation, and the National Association of Real Estate Investment Trusts -- all of which represent large, deep-pocket retailers that have done a number on Main Street. When did Wal-Mart become the spokesman for the needs of Main Street?

What you can do: There are two other arguments against the Big Box Fairness Act:

1) the sales tax is one of the most regressive taxes, hitting low-income families the hardest. These consumers are drawn to the internet as a way to take advantage of the one tax haven they have left. There are far more progressive ways for states to raise revenue -- like closing down their corporate tax breaks for companies like Wal-Mart and "tax expenditures." Medicaid health care payments subsidizing Wal-Mart workers and their dependents are not "fair" to taxpayers on Main Street.

2) if we can discourage consumers from getting in their cars several times a week and driving to their nearest big box mall, this will reduce greenhouse gases and lower the demand for, and price of, gasoline. We are saturated with big box stores, significantly over-built in this wasteful form of a land-consumptive retail delivery system.

All stores -- even the smallest mom and pop corner store -- can build a website and broaden their customer base. Individual entrepreneurs are augmenting their income by selling on ebay and etsy.

The internet is a level playing field tax-wise, and for those who spurn superstores, the internet is a way to fight back by denying Wal-Mart their revenue, and improving the environment at the same time.










 
 
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