Online shopping could soon cost you more. That’s because the U.S. Senate passed a bill — Marketplace Fairness Act — that allows states to require online vendors to collect sales tax on out-of-state purchases. Senior Correspondent Desirée Taylor caught up with John Holub, President of the New Jersey Retail Merchants Association, to find out what the impact of the law will be for retailers in New Jersey.
The new law will quite simply level the playing field for brick and mortar businesses in New Jersey, according to Holub.
“Right now, [they] have to compete with these online only retailers that don’t have to charge and collect sales tax that all bricks and mortar stores in New Jersey have to,” he said.
The unfair advantage stems from a loophole in the law that doesn’t require online retailers to collect sales tax from the consumer.
“When the online-only retailer doesn’t collect it, it’s now the responsibility of the consumer to report that on their income tax form ….. and unfortunately in New Jersey only about 1 percent of people actually report anything on there.”
Holub adds that this loophole isn’t just hurting brick and mortar stores, but also the state.
“We’re projecting by 2015, it’s probably about $350 million that the state is losing in revenue.”
While it may have made sense to give online-only businesses an advantage during the infancy stages of the Internet, Holub said it’s past time to eliminate the special treatment.
“As everybody knows online shopping has increased significantly,” he said. “They don’t need this leg up anymore … There’s a tipping point now where it’s a competitive advantage.”
The advantage that the Amazons and the Overstock dot coms of the world are enjoying is coming at the expense of the health and vitality of main street businesses, said Holub.
“They have a 7 percent advantage over any bricks and mortar stores and for retailers that’s operating on slim margins, they may not be able to absorb that cost,” Holub explained.