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High sales taxes sinking Tempe retailers


Online tax loophole sinking local retailers

Wrong!!! High sales taxes sinking Arizona retailers

If you ask me the real problem is not that merchants who sell on the web don't pay sales taxes, but that local governments tax the crap out of brick and mortar stores which makes it impossible for them to compete with the online stores.

The solution is for local governments to reduce their taxes so that stores in their jurisdictions can compete with online merchants.

This isn't a problem with just crooks in local city government taxing the crap out of their stores, it's an Arizona problem. Arizona has one of the highest sales taxes in the nation and this let's online merchants kick the crap out of Arizona merchants because of the high taxes place on Arizona stores by the Arizona legislator.


Online tax loophole sinking local retailers

By Luci Scott The Republic | azcentral.com Thu Aug 22, 2013 3:36 PM

Jeremy Smith will spend two days with a customer in his family’s plumbing-supply showroom, picking out items for a home, only to be asked if he can match online pricing.

Matching a price is usually not a problem, but he has to charge sales tax of about 8 percent, which can kill the deal because online retailers are not charging tax.

“It can be a $5,000 bathroom remodel, up to $30,000 or $40,000,” said Smith, who works at Central Arizona Supply in Mesa, which is among the company’s 10 stores in the state.

“Any decent-size ticket item, like a $3,000 tub or a $1,000 toilet ... a customer wants to save that 8 percent,” he said. “It’s incredibly frustrating.”

Smith has lobbied members of the U.S. House of Representatives to pass the Marketplace Fairness Act of 2013, which would require sales tax to be charged by online retailers of a certain size. The size is being debated. A version was passed in May by the U.S. Senate, and the bill now is in the House Judiciary Committee.

A study by economists Art Laffer and Donna Arduin found that closing the sales-tax loophole has the potential to lower overall tax rates and create more than 39,000 jobs in Arizona.

Lance Muzslay, co-owner of Sole Sports in Tempe, Scottsdale and Glendale, which specializes in shoes for walking and running, says the same shoes can be found at sporting-goods stores. The difference is that Sole Sports’ staff has the expertise to assess customers’ feet and gait to help them find the right shoe, he said.

“Our service is highly valued when someone doesn’t know what shoe is best for them,” Muzslay said.

But once a customer is fitted with the correct shoe, he or she often will not return because they buy the shoe online and save tax. Muzslay’s business has an online store, but Arizona is losing out on collecting tax from out-of-state online shoppers, he said.

Bill Morrison, owner and manager of Adventure Bicycle in Mesa, a store on the Gilbert town line, has a similar problem. People come in and ride his bicycles and try on his shoes and then buy online.

“It happens all the time,” he said. “It’s hard for us to compete with online sales when they’re not taxed.”

In Chandler, John Wolfe, owner of the downtown gift and souvenir store Sibley’s West, said his business is not greatly affected because he sells items made in Arizona that are not readily available online. But he laments the governmental entities losing out by online buyers not following the law.

Consumers are supposed to include online purchases on their state tax form.

“If you buy something from Walmart online, you’re not at the end of the year going to tally it up,” Wolfe said.

He says that when consumers look at merchandise in brick-and-mortar stores and then buy it online, it is known as “showrooming.” Shipping costs do not deter online buyers and often online retailers are providing free shipping, Wolfe said.

Online shopping adversely affects Southeast Valley municipalities, he said.

“The bricks-and-mortar store in the community doesn’t get the sale. So, if that happens, more and more often you’re going to have a retail area ... deteriorating because people aren’t buying there,” Wolfe said.

Furthermore, he said, government agencies are losing the revenue they could use for operations and services. A previous argument against taxing online sales was that it would be too complicated because each city has a different tax rate, but Wolfe said software now can calculate the tax based on ZIP code.

In Gilbert, Brock Cleaver owns Diecast Cars Now, where he sells collectibles related to racing, including NASCAR items. He sells online.

“I do better online because I can do the no-taxes thing like everybody else when they’re out of state,” he said.

The bill being considered in Congress as it is written would allow businesses selling less than $1 million annually to have a tax exemption, which Cleaver sees as a good thing.

“If it’s a million dollars and over, it will help me fight against my big competition, the giant stores that are corporately owned,” he said.

At the same time, he fears a slippery slope, and expects Congress to gradually lower the revenue cap to where smaller dealers like him would be required to collect tax.

“Arizona sales tax is so high that’s going to price me out again,” he predicted. “I don’t think this legislation is the one that needs to go forward.”

Republican state Rep. J.D. Mesnard, who represents Chandler, Gilbert and Sun Lakes, said the disparity in the way retailers are treated must be addressed, and that if Congress passes the Marketplace Fairness Act, it is important that it not impose additional taxes.

“From a public-policy or a tax-policy perspective, we need to come up with a system that treats everybody fairly,” Mesnard said.

“Talking with my colleagues, we would not be looking to use new revenue from online retailers. We’d probably reduce our sales-tax base or, more likely, reduce our income-tax rates.”

There would not be new taxes coming into the state. Instead, the state would set up a better tax structure, Mesnard said.

“I’m pretty open-minded, but it has to be revenue neutral,” he said. “We are not looking for tax increases but are looking for good tax policy, and that’s the goal in Congress.”

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Tempe Center for the Arts

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