The Main Street Fairness Coalition was unveiled yesterday at Cambridge's Harvard Book Store. The Coalition was formed under the umbrella of the Retailers Association of Massachusetts and was created in response to Amazon.com's plans to open offices in the Commonwealth.
The purpose of the coalition is a simple one: to protect local merchants and shopping districts from the price advantage enjoyed by online retailers. Massachusetts law mandates that residents pay taxes on any online purchase that doesn't have a tax already built into the price. But customers rarely report their online purchases and they are difficult for authorities to track. Physical shops, on the other hand, must add the state's 6.25 percent sales tax on to their prices. This creates, in the words of Coalition co?Chairman David Didriksen, "an automatic 6.25 percent competitive advantage" enjoyed by online retailers like Amazon.
Massachusetts law currently requires online retailers to collect sales tax if they have a store in the state. As such, Staples.com, the online retailer for Staples, charges Massachusetts residents sales tax because it operates stores in the commonwealth. But Amazon, which does not operate physical stores here, does not have to collect sales tax, allowing it to collect the same amount of revenue but with a more attractive price tag. The Coalition hopes to expand the requirement to collect sales tax to any retailer operating a facility in the commonwealth, even if it's not a store.
The Daily supports the Coalition's proposal, because it will likely boost sales for small businesses in Massachusetts and allow the Commonwealth to collect extra revenue without actually raising taxes.
Economically, requiring online retailers to charge sales tax will eliminate much of the advantage commercial online retailers like Amazon enjoy over local businesses. The reason online retailers can supply goods at a cheaper price is that their costs are automatically lower than those of physical merchants who must charge sales tax.
By applying the same tax to all retailers and equalizing those costs, the government would create an even playing field. This would negate the economic disadvantage suffered by physical merchants and allow fairer competition. And an even playing field and purer competition are certainly desirable.
It should be noted, however, that even if online firms' costs are forced to par with brick?and?mortar retailers by the government, the Internet still enjoys a couple of advantages. The first is, obviously, convenience: If the costs are the same, consumers can either drive to the mall to buy a shirt or order it sitting on the couch with their laptops.
The second is inventory: People can acquire products not sold in any store near them by going online to a retailer like Amazon. Equalizing prices won't actually do anything to increase local merchants' inventories. The Internet remains the only source for everything, and unless retailers dramatically expand their inventories they will never overcome that disadvantage.
The Internet has redefined many aspects of life as we know it, and the adjustment to it will likely define commercial law for years to come. The coalition's agenda is a good start, but the competition has a long way to go before it's truly fair. Jon Hurst, president of the Massachusetts Retailers Association, said, "Let's get rid of the incentive to shop outside Massachusetts." A free market is a noble goal, and this is a good first step.
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