Is it fair that only some business have to charge sales tax? Businesses across the country are forced to try to compete with online retailers on a daily basis. Brick-and-mortar stores are forced to charge state sales tax while big online retailers who do not own brick-and-mortar locations in a state are exempt from charging sales tax to customers. That’s one major reason why people love online shopping, and this practice is driving revenues from local stores to online retailers.

Comparatively, online retailers are able to move a large volume of product which can make their prices seem cheaper compared to local merchants. Small local businesses are already at a disadvantage because they do not sell the same volume of product as their competitors, and tacking local sales tax on top of their prices make them seem like an even more expensive and less-desirable option for purchases.

In the past five years there have been legal debates on how to handle sales tax fairness amongst businesses. Some online retailers have agreed to add notifications to their online buying systems that notifies customers that they owe sales tax in the state in which they are making their purchases, but less than 1% of people actually pay the sales tax that they owe from online purchases on their annual income tax returns.

Clearly this is not a new issue. What is new is that more states are talking about how to deal with sales tax fairness at a policy level. When local businesses can’t remain competitive, consumers shop elsewhere which means that state and local economies suffer. On average, it’s about a 4 to eleven percent difference in price between local and online retailers. Currently, about 45 states assess sales tax, and the states that collect sales tax receive about a quarter of their tax revenues every year from sales tax. That means that state legislators have a lot to gain by fighting to enforce online retailers to collect state sales tax, and afeUSA wants to advocate for small businesses in our members states and take advantage of this momentum.

South Dakota is taking the lead and requiring online retailers that make over one hundred thousand dollars or more in sales or more than two hundred purchases in their state to collect sales tax. Alabama is also implementing a similar policy. Both states have run into difficulties with online retailers filing lawsuits asking for a review of the constitutionality of this type of enforcement.

afeUSA has reached out to Representative Roger Hunt to help enforce the message that small businesses need more representatives to stand up and level the playing field for small businesses.